What Is Secured Loan - Meaning & Definition

Get the lowdown on secured loans. Our expert guide covers everything you need to know about this type of borrowing, including its meaning and definition.

17 May,2023 10:40 IST 2862
What Is Secured Loan - Meaning & Definition

During financial emergencies, one can borrow money from banks or can pay it off by using personal savings. But personal savings are post-retirement funds and investing them in mutual funds or stock markets can yield high returns. So, it is not good to deplete them. As a substitute, a loan can be a healthier option.

Borrowing can be a costlier deal but if planned properly can prove to be useful in the long run.

Typically, all loans come with interest charges that the borrower must return to the bank along with the principal amount within a fixed time period. The interest rate on personal loans is usually high, but if secured with a collateral it can be easy on the pocket.

What Is A Secured Loan?

A secured loan is a loan that requires some collateral as a condition for borrowing. The financial institution will hold on to the ownership deed of the collateral until the loan is fully cleared. For these loans the pledged collateral can be gold, car, property, equity, etc.

But that does not mean that secured loans can only be taken against physical assets. Many banks and online lenders now offer secured loans against financial assets like stocks, mutual funds and bonds. Even insurance policies can be deposited at banks to get secured loans. A number of banks also allow its customers to use their savings accounts or fixed deposits as a collateral.

These secured loans differ to some extent from home loans or vehicle loans in which the loan amount is secured by the respective asset. Share-secured or savings-secured loans are secured by the amount saved in the certificate of deposit (CD) account or savings account.

Usually, borrowers get secured loans from banks to lower their interest rate and extend the loan tenure. Lenders too, decide the loan amount based on the value of the security. However, one must try to make timely payments of the EMIs. If the borrower defaults on the loan, the bank will liquidate the asset and settle the debt. Still if the pending loan amount is more than the value of the security, the borrower will have to pay the extra money.

Conclusion

Secured loans can be taken for both personal and business purposes. All one needs is some form of security that can be used to back-up the loan.

If you are looking for secured loans, then IIFL Finance is the right place for you. IIFL Finance caters to all types of loan products, whether secured or unsecured. All loans are available at competitive interest rates. However, if you need a loan in minimum possible time apply online for instant disbursal.

Disclaimer: The information contained in this post is for general information purposes only. IIFL Finance Limited (including its associates and affiliates) ("the Company") assumes no liability or responsibility for any errors or omissions in the contents of this post and under no circumstances shall the Company be liable for any damage, loss, injury or disappointment etc. suffered by any reader. All information in this post is provided "as is", with no guarantee of completeness, accuracy, timeliness or of the results etc. obtained from the use of this information, and without warranty of any kind, express or implied, including, but not limited to warranties of performance, merchantability and fitness for a particular purpose. Given the changing nature of laws, rules and regulations, there may be delays, omissions or inaccuracies in the information contained in this post. The information on this post is provided with the understanding that the Company is not herein engaged in rendering legal, accounting, tax, or other professional advice and services. As such, it should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. This post may contain views and opinions which are those of the authors and do not necessarily reflect the official policy or position of any other agency or organization. This post may also contain links to external websites that are not provided or maintained by or in any way affiliated with the Company and the Company does not guarantee the accuracy, relevance, timeliness, or completeness of any information on these external websites. Any/ all (Gold/ Personal/ Business) loan product specifications and information that maybe stated in this post are subject to change from time to time, readers are advised to reach out to the Company for current specifications of the said (Gold/ Personal/ Business) loan.

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