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Thursday, September 2, 2010

The First Project

Since I have a project about Secured Loans , secured loan interest rate and home owner secured loans, that I must present in a couple of weeks, I figured I'd post on my blog about it also, maybe anyone is interested.
So, here goes:

First of all, what is a secured loan ?

According to wikipedia, a secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed 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 of debt in which a lender has been granted a portion of the bundle of rights to 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 of secured debt/loan is 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.

So, to summarise, a Secured loan is a type of loan that is protected by the borrower’s assets, that can be a house, a car, etc. Those assets now secure the loan as “collateral” or guarantee, in the case that the borrower cannot comply with the loan, the creditor will take possession of such collateral. Secured loans can have many uses, can be used in personal loans, business loans and commercial loans.

Moreover, it is important to note that Secured loans are much cheaper that unsecured loans, and the reason is obvious, they offer collateral that may be used to cover the debt. On the other side, unsecured loans tend to be more expensive because they lack of any collateral or personal assets.

The Types of a secured loan :


  • A mortgage loan is a secured loan in which the collateral is property, such as a home.
  • A nonrecourse 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.
  • 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.-
-EDIT- After a more thorough research, I've found out also that : 

Secured loans can also be home equity loans or home equity lines of credit or even second mortgages. Such loans are based on the amount of home equity, or the value of your home minus the amount still owed. Your home is used as collateral and failure to make timely payments can result in losing your home.
Other types of secured loans include debt consolidation loans where a home or personal property is used as collateral. Instead of having many --usually high interest-- payments to make each month, money is loaned to pay the original lenders off, and the borrower then only has to repay the one loan. This is not only more convenient but it will also save a lot of money over time, since interest rates for secured loans are lower. A debt consolidation loan usually offers a lower monthly payment as well.      

That's what I found out today. I guess I'll continue tomorrow.

10 comments:

  1. I didn't know about this. Definitely enjoyed reading all about the types of loans.

    Anyway, checking in on your blog. I updated my blog recently, check it out.

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  2. You are truly an inspiration! I will keep your thoughts in mind for my next blog posting.

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  3. jmecherie! asta ai invatat la ase nu?

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  4. perfect for my school studies!
    following for sure!

    http://aspedalsburn.blogspot.com/

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    http://thecrispyguy.blogspot.com/

    ReplyDelete