Secured Loan is a loan secured by other assets owned by the debtor. From the creditor’s point of view, such a loan is more secure, which is why secured loans usually have a lower interest rate than unsecured loans.
What can be pledged?
In principle, you can pledge any property (e.g. real estate) or property that is the subject of a loan (e.g. a car). Banks definitely prefer real estate, but in practice it is also possible to pledge financial assets (securities, bonds, stocks, etc.) or valuables. In some cases, a loan can also be secured by the stake in a company or personal property of the company’s owners.
What can be called a secured loan?
The most common forms of a secured loan are the following:
- Mortgages (the real estate is used as collateral)
- Leasing (the leasing company owns the subject of loan until the debt is paid back)
- Investment loans (the lien is placed on the subject of investment)