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what is a secured loan

what is a secured loan插图

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Secured loan: a type of loan that is backed by collateral,an asset like a house or car. Auto loans and mortgages are types of secured loans. Lien: a claim or legal right to an asset (e.g. house,car) used to secure debt. The lien holder (e.g. lender) has the right to seize the asset if you default on the loan.

People also ask

  • What is a secured personal loan?

  • A secured personal loan is backed by collateral. If the borrower defaults, the lender can collect the collateral. For this reason, secured loans tend to offer better rates than unsecured loans. In addition to offering better rates, people take out secured loans to help improve their credit, consolidate debt, or pay for home renovations.

  • What is secured debt financing and how does it work?

  • Secured debt financing is typically easier for most consumers to obtain. Since a secured loan carries less risk to the lender, interest rates are usually lower than for unsecured loans. Lenders often require the asset to be maintained or insured under certain specifications to maintain its value.

  • What is a secured loan for a new car?

  • A secured loan is when the bank has security over the asset in question 鈥?in this case, your new car. This means if something were to happen and you couldn鈥檛 repay the loan, the bank would be able to sell your car to recoup its money. What鈥檚 the advantage for you?

  • What assets can be used to obtain a secured loan?

  • Any asset allowed by law can be used to obtain a secured loan, although lenders will seek collateral that is liquid (i.e., easily sold for cash) and has a value roughly equal to the secured loan amount being borrowed.

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