Definition
A secured loan is a type of financing that requires collateral pledged to the lender in order to guarantee repayment of the loan.
Analysis
A secured loan allows lenders to justify the risk of extending loans that are larger than a borrower can repay in a short period of time. These also allow for high-risk borrows to have access to credit.
Examples of secured loans include:
- Home mortgage
- Car loan
- Some personal loans
- Title loan
- Payday loan
- Pawnshop loan
Some secured loans, such as a home mortgage or car loan require that the borrower allow a lien to be placed on the property by the lender. The lender’s interest in the collateral ends once the loan contract has been satisfied.
