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NISM Certifications · NISM-Series-X-A: Investment Adviser (Level 1) · Debt Management and Loans

In personal financial planning, which of the following is the usual meaning of a 'secured' loan?

A secured loan is one in which the lender holds a charge over an asset, such as property or a vehicle, that can be sold to recover dues if the borrower defaults. Rate type, insurance or lender category do not determine whether a loan is secured.

  1. AA loan where the lender holds a charge over an asset that can be sold if the borrower defaultsCorrect
  2. BA loan whose interest rate is fixed for the entire tenure
  3. CA loan that is insured against the borrower's death
  4. DA loan that is granted only by public sector banks

Explanation

A secured loan is backed by collateral such as a house, vehicle or deposit, over which the lender has a charge. If the borrower defaults, the lender can enforce the charge and recover dues from the asset. Fixed rate, insurance cover and type of lender do not define a secured loan.

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