Considerations for Secured Personal Loans
A secured personal loan is a loan that an individual received that is secured by some form of property that the lender can assume control of through a lien. If the user defaults than this lien is exercised and the lender will own the asset which they will commonly sell. While secured personal loans technically include mortgages and auto loans, some people will scope these out when describing them though conceptually they are the same thing.
Benefits of a Secured Personal Loan
For a lender the benefits of a secured personal loan is the added security and higher chance of recovering funds than in a standard loan arrangement. For a borrower a secured personal loan will provide access to cheaper capital than might otherwise be available due to your risk profile as a borrower.
Considerations for a Borrower with a Secured Personal Loan
Borrowers will often be concerned with their own likelihood of defaulting on the loan and the chance that they will be giving up assets unrelated to the use of the property as security. For example an individual may be borrowing under a personal loan where they will use funds for their business and may be asked to secure the loan with their homes value. If their business fails they could lose their home to satisfy the loan. Concern for this is necessary to support the decision of whether to sign for the security the lender is asking for.
Concerns for a Lender in a Secured Personal Loan
Lenders are concerned with credit worthiness and standard return issues is secured personal loan arrangements, just as they would be for any loan type. However, for these loans the value of the asset you are pledging as security is also important as a way of securing the loan for the lender.
