A Secured Loan

A secured loan is just that, a loan that is given because the borrower pledges collateral such as a car or property that is used to secure the loan given by the creditor. If the borrower defaults on the loan given by the creditor, the creditor takes possession of the asset used as collateral and usually sells it to satisfy the debt amount lent to the borrower. A creditor can offer loans with attractive interest rates and/or repayment periods for a secured loan.

A popular type of a secured loan is normally only given from a bank or credit union that the borrower has a savings account with. A portion of the money in the savings account of the borrower is frozen in the account to secure the loan. The money continues to earn interest while frozen and as the loan is repaid the secured portion in the savings account is freed. While the creditor usually offers a much lower interest rate the disadvantage is that the borrower funds are limited in the saving account.

A mortgage loan is a secured loan. The collateral in a mortgage loan is the property itself such as a home. A nonrecourse loan is a secured loan. With a nonrecourse loan the collateral is the only security or claim the creditor has against the borrower. The creditor has no further recourse against the borrower, if there is a deficiency after foreclosure.

Foreclosure is a legal process, the mortgaged property is sold and the money is used to pay the debt of the defaulting borrower. Repossession is a process in which the property is taken back. When a creditor does not make payments due on the property the property is taken back by the creditor. In some jurisdictions it may or may not require a court order. So if you are looking for a secured loan a great place to start is with your local bank.

Sophie writes for e-SecuredLoan.com e-Secured Loan offers home mortgage, refinance, home equity loans, lines of credit, auto loans and personal loan information. Home buying advice, credit help, calculators and tools. Find a wide range of services and products available to help you meet your goals.