What Is A Secured Loan

A Secured Loan

What is a secured loan?

A secured loan is a type of loan that's attached to an asset. This means that if you default on the loan the asset will be used to offset the loan. The most common type of secured loans are mortgages, which means that in the event you are unable to make a monthly payment on your mortgage, the lending institution will try to collect the asset in order to sell it to pay off the loan.


The loan often times will come with a interest rate, which for secured loans will be much lower, due to the lack of risk, while for unsecured loans the interest rate would be much higher. The more the asset is worth that secures the loan, the more likely the interest rate would be lower due to the small risk that is incurred on behalf of the creditor. Many creditors will not issue unsecured loans but will issue secured loans only. A lot of these creditors could be banks, small and/or large financial institutions that engage in issuing loans on a daily, weekly, and sometimes monthly basis.


A lot of these loans if unpaid will end up negatively affecting your credit. This means that if the loan isn't paid off, there's more consequences than just simply losing your asset, you will also lose some of your credit rating due to your inability to pay off the loan. This is why you should always make timely payments for any loans that you might have. Secured loans can often be obtained with just a simple visit to your bank and speaking with a banker about getting a loan approved. These loans will usually be approved as long as you have decent credit and a good asset to back up the loan.