Secured Loans

A secured loan is a type of loan in which the borrower pledge some of his collateral, say house, land, car, firms, etc, for the purpose of obtaining loan from the lender. It is called secured loan because the loan is secured for lender. This is to say the lender of the loan provides loan amount below the the marginal cost of assets in the time of maturity. If the debtor(the receiver) is default for paying loan in the pre-estimated time then the creditor can enjoy the property of debtor which is pledged. In the hand of creditor secured loan grant him a bundle of right to specified property. The creditors cannot enjoy the right to use the pledged assets. For pledging perishable nature of goods are not pledged.


The purpose of secured loan is to minimize the financial risk associated with the transaction. Since it holds the assets and in case of default creditors enjoy the right to sell the assect to recover his credited amount. In the hand of debtor he may enjoys the more flexible in the terms of loan as compared to others unsecured loans.