A secured loan is a loan product in which the borrower can use some form of asset such as, a car or home as collateral to secure the amount of money they are borrowing from the lender. In the event of default the lender can take possession of the collateral and put it up for sale to satisfy the debt.
Secured loans can be more favorable for the borrower, because you usually can get lower interest rates and better terms, because you have some form of collateral that the lender could use to sell to recoup some or all of their losses.
People with a questionable credit history will never be able to get an unsecured loan, but they can sometimes get a secured loan. The lenders will take a chance on them because their risk is limited.
It is more favorable for the lender to offer a secured loan over an unsecured loan, because they are relieved of most of the financial risk. With an unsecured loan they can not repossess and sell the collateral to recoup any of their losses, so they lose everything they loaned out.
Home loans are considered a secured loan, where the home is the collateral for the loan so if the borrower defaults the lender can foreclose and take possession of the home to put up for auction to try to recoup some of the debt.
Even after the home is auctioned off, if it doesn’t sell for enough money to cover your debt then you will still owe the difference between what you borrowed and what the home sold for at auction, and the bank still has the right to go after you for their loss.
In a normal real estate transaction the secured loan comes in the form of a lien recorded against the real property which shows how much is owed on the property and if you were to sell or refinance your home that lien has to get paid off before the new lender can put their lien on the title.
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