A secured loan is a type of loan where the borrower pledges an asset as collateral to back the loan. This collateral can be a physical asset like a house, car, or other valuable property. If the borrower fails to repay the loan as agreed (defaults), the lender has the right to seize the collateral to recover the unpaid debt

. Because the loan is backed by collateral, secured loans generally have lower interest rates and may be easier to qualify for compared to unsecured loans, which do not require collateral and rely solely on the borrower's creditworthiness

. Common examples of secured loans include mortgages (secured by the home being purchased), vehicle loans (secured by the car), home equity loans, and secured credit cards (secured by a cash deposit)

. In summary:

• The borrower offers an asset as collateral.
• The lender can take the collateral if the borrower defaults.
• Secured loans typically have lower interest rates and higher borrowing limits.
• Examples include mortgages, car loans, and home equity loans.

This arrangement reduces the lender’s risk, which benefits the borrower through better loan terms