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A secured loan is a type of loan where a tangible asset is pledged by the borrower to the creditor. This pledged asset is generally known as collateral. Collateral ensures creditors interest to acquire their money back in the event borrowers default on their payment. The collateral being pledged also usually have the same cost as the loan being given. The higher the amount of the loan, the value of what the collateral should be more or less equivalent to the loan settled. Secured loans is the most favored and most common loaning process among creditors since it assures them of a guaranteed payment.

Although limited, the creditor pretty much have the right over a pledged property in a secured loan. The confidence given to creditors by collaterals also bring forth the rules in setting loan limits and interest rates.

The benefit of a secured loan to the borrower is that it allows him/her to get a more accommodating and even a relaxed manner of payment. He may even be open to get an additional loan (secured or unsecured) given that the current loan is going smoothly. For the creditor, he would still get his money back in case the borrower fails to pay a certain size of the loan.

In the financial world, every benefit comes with a risk. Even though creditors are ensured of getting back the unpaid borrowed asset via the borrower's collateral, it still does not guarantee them that they will get the equal sum they have lent by selling the borrower's pledged asset. The risk it poses to the borrower is the potential loss of his home.

One of the most popular secured loans known all over the world are mortgage loans. Benefits and risks go both ways for the creditor and borrower. The purpose of getting the mortgage loan is to pay for a real estate property that the borrower will also use as his collateral. The home of the borrower may be foreclosed if the borrower fails to pay an accumulated amount for a certain period. For the lender of the loan, his insurance is the pledged real property but there is no certainty when he will get the full amount he lent to the borrower back. Whether the borrower will be able to sustain payments or if foreclosure is bound to occur, there's no certainty if or when the foreclosed home will be sold at the same value.

In addition to securing a collateral, the borrower's name should appear as the owner of the equity since creditors will not accept pledges from borrowers that do not bear their own name. To make sure that the borrower is capable and honest enough to be granted the loan, creditors make investigations or 'credit check.' If the credit check passed, a go signal is given and the secured loans is granted in the form of a written contract.

Mark Dawson writes for the Loan Arrangers. Where visitors can compare secured loans online, and apply for the best rate secured loans available to them.