Secured Loans


The opposite of secured loans is unsecured loans which is not connected to any specific piece of property and instead the creditor may only satisfy the debt against the borrower rather than the borrower’s collateral and the borrower. Generally speaking, secured debt may attract lower interest rates than unsecured debt due to the added security for the lender; however, credit history, ability to repay, and expected returns for the lender are also factors affecting rates. The term  secured loans is used in the United Kingdom, while in the United States it is more commonly known as secured debt.

There are two purposes for a loan secured by debt. In the first purpose, by extending the loan through securing the debt, the creditor is relieved of most of the financial risks involved because it allows the creditor to take ownership of the property in the event that the debt is not properly repaid. In exchange, this permits the second purpose where the debtors may receive loans on more favorable terms than that available for unsecured debt, or to be extended credit under circumstances when credit under terms of unsecured debt would not be extended at all. The creditor may offer a loan with attractive interest rates and repayment periods for the secured debt.


How to Create Secured Debt

Debt can become secured by a contractual agreement, statutory lien, or judgment lien. Contractual agreements can be secured by either a Purchase Money Security Interest (PMSI) loan, where the creditor takes a security interest in the items purchased (i.e. vehicle, furniture, electronics); or, a Non-Purchase Money Security Interest (NPMSI) loan, where the creditor takes a security interest in items that the debtor already owns.




Secured Loans examples





Acquisition Loans, Asset Finance, Bridge Loans, Business Credit Lines, Construction Loans, Corporate FinanceDebt Finance, EBITDAEquipment Finance, Equity Finance, Factoring, Hard Money LoansInternational Finance, Investment Funding, Joint Venture, Mezzanine Finance, Term Loans, Trade Finance, Unsecured LoansVenture Capital

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