A secured loans is a loan in which the borrower pledges some asset (e.g. a car or property) ascollateralfor the loan, which then becomes asecured debtowed to the creditor who gives the loan. The debt is thus secured against the collateral — in the event that the borrower defaults, the creditor takes possession of the asset used as collateral and may sell it to regain some or all of the amount originally lent to the borrower, for example,foreclosure of a home. From the creditor's perspective this is a category ofdebtin which a lender has been granted a portion of thebundle of rightsto specified property. If the sale of the collateral does not raise enough money to pay off the debt, the creditor can often obtain a of a home. From the creditor's perspective this is a category ofdebtin which a lender has been granted a portion of thebundle of rightsto specified property. If the sale of the collateral does not raise enough money to pay off the debt, the creditor can often obtain a deficiency judgment against the borrower for the remaining amount. The opposite ofsecured debt/loanis unsecured debt, 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.
Types a scured loans
*. Amortgage loan is a secured loan in which the collateral is property, such as a home.
*. Anonrecourse loan is a secured loan where the collateral is the only security or claim the creditor has against the borrower, and the creditor has no further recourse against the borrower for any deficiency remaining after foreclosure against the property.
*. A foreclosure is a legal process in which mortgaged property is sold to pay the debt of the defaulting borrower.
*. Arepossession is a process in which property, such as a car, is taken back by the creditor when the borrower does not make payments due on the property. Depending on the jurisdiction, it may or may not require a court order.
*. A repossession is a process in which property, such as a car, is taken back by the creditor when the borrower does not make payments due on the property. Depending on the jurisdiction, it may or may not require a court order. There are two purposes for a loans secured by debt. In the first purpose, by extending the loans through securing the debt, the creditor is relieved of most of the financial risks involved because it allows the creditor to take 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 loans with attractive interest rates and repayment periods for the secured debt.
United States law of debt secured by property
In the case of real estate, the most common form ofsecured debtis thelien. Liens may either be voluntarily created, as with amortgage, or involuntarily created, such as a mechanics lien . A mortgage may only be created with the express consent of thetitle owner, without regard to other facts of the situation. In contrast, the primary condition required to create amechanics lienis that real estate is some how improved through theworkormaterialsprovided by the person filing amechanics lien. Although the rules are complex, consent of thetitle ownerto themechanics lienitself is not required. In the case of personal property, the most common procedure for securing thedebtis described through theUniform Commercial Codeor UCC. This statute provides a system of forms and public filing of documents by which the creditor's interest in the property is made known.In the event that the underlyingdebtis not properly paid, thecreditormay decide toforeclosethe interest in order to take theproperty. Generally, the law that allows thesecured debtto be made also provides a procedure whereby the property will be sold at public auction, or through some other means of sale. The law commonly also provides aright of redemption, whereby a debtor may arrange for late payment of the of the debt but keep the property.
