Secured Loans

secured-loans In order to secure a loan, the borrower has to endorse the loan with an asset (property, car, etc.) as a secured debt to the creditor when the loan is granted. In the eventuality that the borrower fails to return the loan, the asset becomes the creditor’s possession as collateral and can be sold in order for the borrower to regain a part or the whole amount of the loan. In case the borrower doesn’t regain the entire borrowed amount after the collateral’s sale, he can legally obtain the rest of the amount from the borrower. Opposite to the secured loan is the unsecured loan, which doesn’t have any property as collateral, so for a loaner, the only way to regain the loan is directly from the borrower.

A secured debt has two purposes: first of all, there is the financial risk relief for the creditor; in case the loan cannot be returned, the borrower still has the property and can regain some or the entire amount by selling it. Second of all, such a loan presents advantages for the lender, as well, as it can gain more favorable terms for the loan. The borrower can also extend the credit with secured debt, while the unsecured loan cannot be extended. Same, the borrower can benefit of good repayment periods and interest rates for a secured debt.


  • The mortgage loan implies a property, like a home, as collateral
  • The nonrecourse loan means that the creditor has no other recourse against the debtor but the collateral, so there is no other possibility to regain the deficiency that may result after selling the property.
  • The foreclosure implies a legal process with the purpose to sell the mortgaged property so that the creditor regains the debt.
  • The repossession means that the creditor takes back the property, possibly a car, if the borrower fails to pay back the loan.

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