What is a Secured Loan?
Answers:
It is self-explanatory, a loan secured against something. A loan is an extension of credit, the lender being creditor, the one who takes the loan being indebted to the creditor as debtor.
A creditor expects to see his money returned at some point. Usually (not always, e.g. a family member loaning money), to ensure this happens, a lender will demand some form of asset against which the loan amount can be recovered in the event of the debtor defaulting. The asset is something to which the creditor can point to in event of default and say "that asset is mine in title, I can take my asset, sell it off and regain my money".
So, the asset is security against loss of the loan amount.
Secured lenders, in cases of insolvency have first rank. Because they have legal title to an oject, they do not queue with other creditors. They point to the asset that they have legal title (although not necessarily possession of - see below) and remove it from the pool of assets in liquidation. They can do what they wish with the asset because they own it, in so far as their debt amount is covered by it. If the asset is worth more than the loaned amount, any surplus must be returned to the pool of assets, or to the 'debtor' (an innacurate description if he has now had his loan paid off through the seizure and sale of the asset).
There are a number of different types of security, some are possessory, others are non-possessory. The most obvious example of a non-possessory security is a mortgage. The bank does ont hold the property to which the loan is secured. It allows you to live in it.
Contrast this, with for example, a lien, the best example of which is a pawned item. The broker retains the item until you pay back the loan he has given you.
Secured loans may also be secured through other means. Often, asset security is combined with guarantees, allowing a bank to raid the personal assets of, say, a director of a company who has contracted to give up his personal dissassociation with the company via limited liability by personally guaranteeing his company's debts.
So, simply, a secured loan is an extension of credit, where an asset of the debtor is held up, in the even of default on repayment of the loan by the debtor, to allow the creditor to recover the outstanding loan amount.
It is a loan that is secured on your property.ie a second mortgage,if you default they would have a claim upon your home.
You basically have the loan secured on your property or land so if you can't pay they can reposes your home or land to cover payment.
secured on something that you own.. like a house
don't pay up, and your property is repossessed
It's a loan secured on your house, if you default they can make you sell your house to get their money
ya , u will be satisfy with this ....
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Like the folks below have said, it represents something the lender has a claim to and can repossess and sell if you breach the terms of your loan.
Best one is your mortgage; the security is your home. But this is in fact two separate agreements; (i.) the loan agreement between you & the bank - this is a repayment arrangement based on them lending you the cash and (ii.) you grant them the option to reposses and sell your home in the case you breach the loan agreement.
Other ones are these `debt consolidation` loans where they lend you cash (like the mortgage firm / bank), but they have secured their loan of cash against your home.
Another one is a car lease (car is the security), but it can literally be any asset at all, a company, parts of a company, plot of land, boat, jewellry, shares, rights to an idea, patents, copyright over songs or films, consumer goods, bank account etc etc. Depending on the loan agreement and the persons/entities involved will also dictate what Act of Government or Law presides over it.
Oh, and one more thing, you cant offer people as security in this country - we stopped doing that about 700 years ago!
Cheers - Brad M
A loan where the borrower offers an asset to which the lender has access in the event of the borrower failing to make the loan repayments is secured loan.
http://www.loans-park.co.uk/securedloans...
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