Categories: Business Loans
| On 2 years ago

Secured Term Loans Explained

Secured term loans are the most common type, where the borrower has to secure a loan with collateral. Due to the uncertain nature of loans, secured term loans are very popular and widely practiced by individuals and financial institutions. They mostly employ this type of loan when a huge sum amount is in question. Read on to find out all the important details about secured term loans.

What are secured term loans?

This is a type of loan in which the borrower pledges his assets as collateral to obtain a sum from the lender. On doing this, the asset becomes a secured debt owed to the creditor. If you default, the creditor takes possession of the asset (collateral). He could sell it off to regain the sum borrowed or use it for other reasons. In most cases, if the asset does not equal the monetary value of the loan, the creditor can obtain a deficit judgment against the borrower to pay off the remaining amount.

On the flip side of secured term loans are unsecured loans. These loans are not anchored on any collateral or asset. It is given in good fate, from the lender to the borrower. Generally, secured term loans attract lower interest rates than unsecured loans. This is because of the high risk of one and relatively low risk of the other.

How can I get a secured term loan?

Before obtaining a secured term loan, here are some things that you should consider to ensure that the process doesn’t backfire:

Interest rate:

this is the extra amount that a loan attracts asides its capital. It is mostly calculated periodically and as a percentage of the capital. You should be certain that the loan is not going to be too expensive in the long run.

Loan term:

the duration we give you to repay the loan is also very important. The shorter the repayment period, the higher your monthly payments. However, you would pay less amount overall, since it’s a short period and interest would be in your favour.

Extra fees:

these include application fees, monthly fees, cost of appraisal to evaluate the value of collateral, loan originator fee, etc.

Monthly payment:

whatever loan it is, ensure you can comfortably meet the monthly payments, even in inconvenience. This is because missing this payment could mean you’d lose your property used as collateral.  

Collateral requirements:

different lenders have different collateral requirements that you should take time to go through. Better still, involve a professional for guidance.

The amount of money and time for disbursement: of course, you should check to see if the lender can offer as much as you need. Also, check the disbursement time in order to match it against your urgent need.

Examples of secured term loans

Some examples of secured term loans include:

  1. Mortgage
  2. Auto loan
  3. Boat loan
  4. Recreational vehicle loan
  5. Home equity line of credit

What are the advantages of secured term loans?

The major advantages of secured term loans are:

  1. Lower rates
  2. Higher borrowing limits
  3. Longer repayment terms


Although it might sound risky, secured term loans are actually a good option if you don’t qualify for unsecured loans. They offer a lower rate, and as long as you can meet the monthly payments, you wouldn’t have any problem. Before borrowing, it is important that you research your lender and stick with only credible sources. Also, go through the proposed contract details of the loans very carefully.