Are you planning to buy a new house? Or may be a new vehicle? If so then you would most probably be taking a loan. It is very easy to apply for loans but it is ultimately not so easy to secure one. The biggest hurdle in the area of securing a loan is that most lenders would want you to keep collateral security against the loan. Such loans which have collateral security against itself are known as secured loans. The maximum number of loans which are sanctioned every year in an economy falls under the category of “secured loans”. The lender and the borrower thus enter into an agreement which states that in case of non repayment of the loan the lender gets the right to take over the property of the borrower. This right of the lender doesn’t extend to all the properties of the borrower. This stands true for only those properties of the borrower which the borrower had kept as collateral security with the lender. The lender and the borrower sign the deed of trust when the loan is finalized. This legal document clearly states that in case of non repayment of the loan by he borrower the lender gets the right to take over the properties of the borrower which has been kept as security.
There is a need as this point to explain the meaning of the term “collateral security” because this comes in connection with the term “secured loans”. For obtaining a loan the borrower will have to keep some property as security with the bank/individual lender. This property is termed simply as “security”. Mostly this “security” is not equivalent in worth to the loan taken. In such a case the lender runs the risk of losing a good part of his money in case the borrower fails to repay the loan. It is with this thought in mind that most of the lenders prefer “secured loans”. 

Secured loans mean that the lender will have to keep collateral security against the loan taken. For example if a person wants to take a vehicle loan and wishes to repay he loan in 5 years then the bank may ask for a security against this loan apart from the basic security of the vehicle. You see the object for which the loan is taken is always treated as the “basic security” and in case of non repayment of the loan the lender has the full right to take over that particular property which has been bought with the lender’s money. The fate of this property then completely rest with the lender. If he wishes then he can sell it off otherwise he can use it personally. Secured loans are the most preferred ones when it comes to giving loans. You see nobody wants to lose his or her money and giving secured loans is the best of way of ensuring that your money is not wasted because you loaned it to somebody.