What is a Secured Loan?


A secured loan is a loan that a bank or any registered financial institution grants if the applicant can provide security against the loan. In case the applicant fails to settle the loan, the bank or the financial institution that granted the loan may seize the assets of the applicant to repay their loan.


Secured Loan

To qualify for a secured loan, an applicant must have something that the institution can use as collateral. Immovable assets such as a house, land, or building could be used when one is applying for a loan. Other assets could be in the form of investments account, provident fund, and pension fund, provided there are enough funds to withdraw in equivalence to the required loan.

A secured loan could be used to buy a home; this is a great advantage as there is no bond registration required and this could save the applicant a substantial amount of money. The applicant could also negotiate repayment; this will be highly influenced by the funds available on the other sources used against this loan. This negotiation may bring about attractive interest rates compared to a normal loan.

A person who has saved a good amount of money in a form of investment and wishes to start a business but does not wish to withdraw the investment amount may use this facility. That person may borrow money from the financial institution and use it as capital, this could reduce the risk and has more advantages than disadvantages. For instance, that person could use the interest from the investment, provided it is sufficient, or add an account to repay the loan while the business is developing.

As much as the secured loan may have many benefits compared to other types of loans, there is also a risk that lies within it. Should you fail to repay the loan, the financial institution that lent you the money is well within its rights to seize your house or other assets presented in the loan agreement. You could lose your house or any assets that you may have used to secure the loan.