What is an secured loan?

I prefer a secured loan over any other loan options. If you need money, you should think about taking a secured loan. In most cases, the processing is swift, and you may expect to get your funds within a few days. What if you could acquire a loan with a lower interest rate than a personal loan by promising a valuable asset? Clearance may take a little longer than a personal loan, and more documentation may be required. These loans are referred to as Secured Loans. Let’s see what is an secured loan.

What is a secured loan means?

A secured loan is one in which you are given a loan in return for assets or security from the lender. It could be any item, such as gold, a home, or a financial asset, such as share capital, fixed deposits, mutual funds, life insurance, and so on. Until the loan is repaid, the lender maintains the security both physically or as a claim on the ownership. If you default on your debt, your lender may sell your collateral to cover their losses.

Types of secured loan:

A loan against property is a loan secured by your home or business, or for the purchase of commercial space. The amount that can be borrowed is normally between 60 and 65 percent of the property's worth. Before granting the loan, the bank will examine your documentation, such as bank statements or tax returns, and your credit score, as well as a complete physical inspection of the property.

You can acquire a loan for up to 75% of the value of your gold jewellery or gold coins. Again, if the price of gold declines, you will have to prepay a portion of your loan just before the end of the term.

It covers loans secured by financial products such as stocks, bonds, standard life insurance policies, and debt and equity mutual funds. The loan amount varies depending on the instrument. For example, you can obtain up to 60% of the net asset value from equity mutual funds, whereas you can get up to 50% of the market value of the shares from equity.

A loan against fixed deposits is one of the simplest and fastest secured loans to obtain. You can borrow up to 85 percent of the value of your FD, and the interest rate is only applied to the amount borrowed. You can keep earning interest on the FD balance, although the loan rate is 2% higher than the FD rate.

I think you understood what is an secured loan.