What type of loan is secured by collateral such as property, allowing lenders to claim the property if the debt is unpaid?

A secured loan is a type of loan that is backed by collateral, such as property or assets. This means that if the borrower fails to make the required payments, the lender has the legal right to claim the collateral to recover the unpaid debt. The most common example of a secured loan is a mortgage, where the property serves as the collateral for the amount borrowed.

The presence of collateral not only reduces the risk for lenders but can also result in lower interest rates for borrowers, as the loan is less risky from the lender's perspective. This type of loan structure is fundamental in the lending industry, as it provides both security for the lender and access to funds for the borrower.

In contrast, options like unsecured loans do not require any collateral, which means they typically come with higher interest rates due to the increased risk for lenders. A chattel loan is also secured but specifically relates to movable personal property rather than real estate, while a bridge loan is a short-term financing option designed to bridge the gap between the need for immediate funding and the availability of more permanent financing. Understanding the nature of secured loans is crucial for anyone involved in mortgage lending, as it outlines the fundamental protections and agreements that underpin the borrowing process.