Secured Debt

Secured debt is a type of loan backed by an asset, which serves as collateral. This means that if the borrower fails to repay the loan, the lender has the right to take the asset to recover their money. Common examples include mortgages, where the home is the collateral, and auto loans, where the car serves as security. Because secured debts reduce the risk for lenders, they often come with lower interest rates compared to unsecured debts, which are not backed by any asset.