Definition of Secured Loan
By Dave Manuel
What is a "secured loan"? What is the definition of a "secured loan"?
A "secured loan" is a loan that has been "secured" by some sort of collateral.
An "unsecured loan", on the other hand, is a loan where there is no collateral.
One of the most common types of "secured loans"? A mortgage. You are taking out a loan from the banker or lender, and you are pledging your house as collateral. If you default on the loan, the bank will seize your home, sell it and use the proceeds to help recoup their money.
A car loan is also a type of "secured loan", as the lending company has the option of seizing your car if you don't pay.
Secured loans have less risk to lenders due to the fact that you are providing collateral. For this reason, secured loans will often have lower rates of interest than unsecured loans.
One of the most common types of unsecured loans? Credit cards. For this reason, credit cards can get away with charging a much higher interest rate.
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