Secured loans - It is a loan which is protected by any assets or some sort of collateral is known as a secured loans.Now for example if any costly item is purchased such as car,house,etc which can be placed as collateral and a lien can be used as on such purchases.
The bank or a finance company will hold the title or the file until the loan has been paid fully with interest and all the applicable fees,
Items like stocks,personal property,bonds,equity can also be put up to secure a loan.
It in case the borrower of the loan cant pay the loan,then the creditor will take the possession of the asset used as an collateral and may sell the asset or can get some amount which is originally lent to the borrower,
For example foreclosure of a house.Now in this case this comes under the category of debt as far as creditor's side is concerned and in which a lender has granted a portion of the bundle of rights to specified property.If the sale of the collateral does no fetch enough amount of money to pay the debt of the loan then the creditor can often obtain a deficiency judgement against the borrower for the remaining amount.
There are two purposes for a secured loan.
First purpose is for extending the loan through securing the debt,the creditor is relieved of most of the risks involved because it allows the creditor to take the property in the event that the debt is not properly paid in exchange.
Second purpose is that where the debtor may receive loans on more convenient terms than that available for unsecured debt or to be extended credit under circumstances when credit under terms of unsecured debt would not be extended at all.Creditor may offer a loan with attractive interest rates and repayment time for the secured debt
There are two types of secured loans:
1) Mortgage loan
2) Non-recourse loan
At last we can say that a secured loan is very advantageous for obtaining large amount of money quickly and easily.