Definition
A loan that requires collateral to back it, often offering lower interest rates because the lender’s risk is reduced.
What to consider
- Diversify your portfolio by investing in a mix of securities.
- Review the risk and return profiles of different options.
- Stay informed on market trends to guide your choices.
Real world scenarios
- Stefan’s bank offers him a secured loan at a lower rate because he uses a certificate of deposit as collateral. He ensures he can repay it promptly to avoid losing his asset.
- Vanessa finances her small business equipment with a secured loan. The machinery itself serves as the collateral, helping her get favorable terms.
- Before signing, Sam carefully reads the contract, acknowledging that defaulting means losing the collateral pledged for the loan.
Related terms
Related Playbooks
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