Secured Loan

A loan is any amount or value that a lender temporarily gives to the borrower. The two parties agree on the size of the amount to be borrowed, the interest rate for the loan’s repayment, and the payment terms or the duration in which the loans has to be paid back. There are two general classifications of loans: the secured loan and the unsecured loan. For this article, we shall focus the discussion on secured loans.

A secured loan is a type of loan where the lender asks the borrower to put in an asset in their contract that will serve as guarantee for the repayment of the debt. The asset is called collateral and this collateral may either be a real property or a car. Remember that secured loans are usually done with big loans such as mortgage loans for houses and auto loans for cars. This is why the collateral to be used must also have high values and therefore also requires a house or a car.
It is the obligation of the borrower to repay a specified amount at the end of a particular time frame. If the borrower fails to pay on time or completely defaults on the loan, the lender may then repossess the property or asset. Secured loans are named that way because of the guarantee that the risk of not having paid is secured by the collateral.
We can see that secured loans are generally good for both the borrower and lender. Yet, there are still myths surrounding the decreasing popularity of secured loans. A lot of people do not know that when they offer their current home as collateral to a loan, they do not necessarily have to move to another place when they fail to pay the debt in full. The only time that the lender can claim the property is when the borrower completely defaults on the loan.
Another popular myth affecting secured loans is that people think that they can escape or run away from the lender if they get an unsecured loan instead. Despite the lender not having a guarantee of getting paid back, these lending institutions usually have several ways of recovering the amount that is left on the unsecured loan. Another thing that lenders do to “get back” on their delinquent borrowers is that they release a blacklist in the market and thus giving you a bad credit history. Remember that a bad credit history will make you less likely to be able to get another loan. 

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