Secured loans are business or personal loans that require some type of collateral as a condition of borrowing. A bank or lender can request collateral for large loans for which the money is being used to purchase a specific asset or in cases where your credit scores aren’t sufficient to qualify for an unsecured loan. Secured loans may allow borrowers to enjoy lower interest rates, as they present a lower risk to lenders. you stop making payments, the lender can seize the collateral that was used to secure the loan

Features of Secured Lending

  • Secured loans are loans that are secured by a specific form of collateral, including physical assets such as property and vehicles or liquid assets such as cash.
  • Both personal loans and business loans can be secured, though a secured business loan may also require a personal guarantee.
  • Banks, credit unions, and online lenders can offer secured personal and business loans to qualified borrowers.
  • The interest rates, fees, and loan terms can vary widely for secured loans, depending on the lender.

Types Of Secured Lending

  • Business Loan

A business loan is a loan specifically intended for business purposes. As with all loans, it involves the creation of a debt, which will be repaid with added interest. A business loan is a debt that the company is obligated to repay according to the loan’s terms and conditions, the lender can seize the collateral that was used to secure the loan

  • Personal Loan

A personal loan does not require collateral or security and is offered with minimal documentation. You can use the funds from this loan for any legitimate personal financial need, a personal loan delivers a one-time payment of cash to you and you have to pay back that amount plus interest in regular, monthly installments over the term of the loan.

Benefits of Secured Lending

  • Lower interest rate than unsecured loans because of the less financial risk.
  • Longer repayment terms of the loan make it more affordable.
  • Available tax deductions for interest paid on certain use of loan.
  • Bigger borrowing limits make it easier for you to avail the cash.