collateralized loans

Collateralized loans are loans secured by an asset, such as property, stocks, or other valuable possessions. If the borrower defaults, the lender has the right to seize and sell the asset to recover the loan amount. This security reduces the lender's risk, often resulting in lower interest rates for the borrower. Common examples include mortgages (secured by the home) and car loans (secured by the vehicle). Collateral provides a safety net for lenders, encouraging borrowing while giving borrowers access to larger or more favorable loan terms.