What are Secured Loans?

What are Secured Loans

Secured loans are the type of loans that requires borrowers to usually offer a collateral or security against which the loan is provided. These loans are protected by an asset and the item purchased, such as a home or a car, can be used as a collateral. The lender will have the original Sale Deed or title documents until the loan is paid in full. Other items can also be used as a collateral, such as stocks, bonds, etc. In case, the borrower fails to pay the loan repayment, the lender has full right to take possession of the Collateral.

The most common way to borrow a large amount of money is through Secured Loans where the lender provides a large amount of money with the promise that it will be repaid. One can mortgage their home or any other valuable asset to make sure that you will do all you can to repay the loan.

Secured loans are not just for new purchases and they can also be Home Equity Loans or Loan Against Property. This type of loan can also be in the form of a Line of Credit or an Overdraft. These are based on the current value of your home, minus the amount still owed as a loan, if any. These loans are usually offered by using your home or any asset as a collateral.

There is only one type of risk that is, if you can’t repay a secured loan amount, the lender can sell your collateral to pay off the loan.

Some of the Best Features of a Secured Loan are as follow:

  1. Lower Interest rates
  2. Higher borrowing limits
  3. Longer repayment terms
  4. Higher processing time, as the property also needs to be evaluated.


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