Secured Debt

Secured debt is debt in the form of a loan that is secured by another asset such as a car or a house. This is done to show good faith that you will complete the repayment. If you can't keep up with your payments, the creditor has the right to take the asset you put up for collateral.

Types of Secured Loans

One popular secured loan is the savings secured loan. This is when a portion of your savings account is frozen (but continues to accrue interest) and you are loaned the amount of the account that is frozen. This way if you default, the bank already has the money and in return you get a lower than average interest rate.

A mortgage loan is a secured loan in which the collateral is property, such as a home.

A non-recourse 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 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.