Secured Loan
Secured Loan is a loan where the borrower pledges some asset as collateral for the loan which then becomes a secured debt owed to the creditor who gives the loan. If the borrower defaults on the secured loan, then the creditor may take possession of the asset and sell it to satisfy the debt.
There are two purposes for a secured loan. (1) creditor risk is reduced because the creditor can take the property securing the loan; and (2) debtors receive loans on more favorable terms than available for unsecured debt.
Examples of assets that can be used as collateral include:
(a) automobile
(b) property such as real estate
(c) intellectual property (patented)
(d) cash, certificates of deposit, deposit accounts
(e) inventory
(f) securities, bonds, common stock
(g) pension funds and retirement accounts
(h) equipment, machinery
secured loans for people with bad credit, versus unsecured loans
