Secured loans are a type of debt where a borrower 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 themselves. Secured loan applicants get low-interest rates and flexible tenures because the borrower has given their property as collateral and the bank can benefit from the lower risk profile. Failure to repay the loan leads to the loss of the property as the lending institution disposes off the same to recover their money.
The purposes are 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.
What Types of Collateral Can be Used to Back a Secured Loan?
Any asset under the umbrella of law can be used to obtain a\ secured loans for bad credit , mostly lenders seek liquid collateral easily sold for cash and has a value roughly equal to the secured loan amount being borrowed.
Generally, secured loan collateral examples are in the following forms:
- Real estate, including any financial equity earned since purchasing the residence
- Bank accounts, including checking accounts, savings accounts, certificates of deposit accounts, and money market accounts
- Cars, trucks, SUVs, motorcycles, boats, or other vehicles
- Stocks, mutual funds, or bond investments
- Insurance policies, including life insurance
- Precious metals, high-end collectibles, and other valuables