explain the Secured Loans
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A secured loan is a loan backed by collateral—financial assets you own, like a home or a car—that can be used as payment to the lender if you don't pay back the loan. The idea behind a secured loan is a basic one. Lenders accept collateral against a secured loan to incentivize borrowers to repay the loan on time....
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In Banking and Finance,secured loans refer to those financial loans which are supported by any collateral to ensure security or protection against potential loan default.
Explanation:
- Secured loans are protected or secured by any collateral enforced by the lender such as banks or other financial institutions as a legal protection or immunity against any possible loan default by the borrower.
- A collateral constitutes any personal or private property that officially belongs to the loan borrower such as house or residence,refrigerator,personal vehicle,privately owned land and so forth.
- Collateral is accepted through a formal and legal agreement between the lender and the borrower of the loan which states that the borrower has to repay the loan in full along with any additional payments such as interest payments or EMI within a specified time period.Any failure to do so on borrower's behalf will lead to the acquisition of collateral which belong to the borrower as per the loan agreement.
- Therefore,the lender takes the formal consent of the borrower that f he or she fails the pay the loan amount or principle in full on time,the collateral can be officially claimed by the lender.
- Examples of secured loan often high risk long term loans such as mortgage or home loans,vehicle/car loans etc.
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