What is a secured loan?

A secured loan is a type of loan in which a borrower pledges an asset such a car, property, equity, etc. against that loan. The loan amount made available to the borrower is usually based on the value of the collateral. If in case the borrower defaults the loan, the lender can liquidate the asset and recover the loan amount, making these loans risk-free for the lender. As a result, these loans are easier to obtain and charge a lower interest rate than an unsecured loan.

Types of secured loan

Usually a secured loan can be availed against the following types of collateral:

• Real estate, including any financial equity earned since purchasing the residence
• Bank accounts such as savings accounts and fixed deposits
• Commercial and residential property
• Private vehicles
• Stocks, mutual funds, or bond investments
• Insurance policies, including life insurance
• Precious metals, high-end collectibles, and other valuables

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