Secured loans are a type of debt where an applicant mortgages their immovable property or hypothecates their movable assets to get the necessary funds. It is one of the easiest loans for people to avail. Secured loan applicants get low interest rates and flexible tenures. This is because the applicant has given their property as collateral and the bank can benefit from the lower risk profile. Failure to repay the loan leads to loss of the property as the lending institution disposes off the same to recover their money.
These loans can be taken for a variety of purposes such as buying a new car, a house or starting a new business. This allows applicants to do things that would not have been possible otherwise due to lack of funds.
Purpose of Secured Loans
These loans give an opportunity to applicants to get the necessary finance on better terms. Since the applicant has pledged an asset to avail the loan, it puts them in a comfortable position as they can bargain for lower interest rates and flexible tenures, as compared to an unsecured loan. In addition, the applicant can get higher loan amounts based on the value of their collateral.
Types of Secured Loans
- Loan Against Property or Mortgage Loans
- Car Loans
- Home Loans
- Business Loans