What is a Secured Loans

Secured loans are an obligation upon the borrower to repay a specified amount at the end of a particular time period. The lenders demand collateral from the borrower to act as security, in case the borrower is late or fails to pay the secured loan in full.

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An asset of sizeable value can act as collateral. Most often, homes are offered as collateral. The lending company determines the value of the collateral. The lending company conducts a valuation of the asset to determine the amount that can be advanced to the borrower.

Offering collateral does not mean losing use of the collateral. The lender gets the ownership rights to the collateral. Unless the secured loans are defaulted, these rights cannot be exercised.

Secured loans are credited with being the cheapest financial option. The rate of interest being charged on secured loans is the lowest. This is mostly because of a low degree of risk entailed with secured loans. A special tool called a loan calculator can make the task of comparison of interest rates easier.

It is not essential to have a perfect credit rating to get a secured loan. Since the amount of a secured loan never exceeds the value of collateral, the lender can liquidate the collateral in case of default. Thus, lenders offer secured loans to people with bad credit as well. Special cases of bad credit include the following:

• CCJs
• IVAs
• Insolvency
• Self-employed individuals
• Mortgage arrears

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