A secured loan is a type of loan in which the borrower pledges an asset, such as a car or property, as collateral for the loan
. This means that if the borrower defaults on the loan, the creditor can take possession of the asset used as collateral and may sell it to regain some or all of the amount originally loaned to the borrower
. Secured loans are commonly used for large purchases, such as a new home or vehicle, and may offer lower interest rates than unsecured loans because of the added security for the lender
. However, credit risk and expected returns for the lender are also factors affecting rates
. Mortgages, auto loans, and home equity loans are examples of secured loans
. In contrast, unsecured loans are not connected to any specific piece of property and may satisfy the debt only against the borrower, rather than the borrower's collateral
