A secured loan is a loan in which the borrower promises several assets (such as a car or property) as collateral for the loan, which then becomes guaranteed debt owed to the creditor who provides the loan. Thus, the debt is secured against the collateral - if the borrower fails, the creditor takes over the asset used as collateral and can sell it to recover part or all of the amount originally lent to the borrower, for example, the seizure of a home. From a creditor's perspective, this is a category of debt in which the lender has been given a portion of the bundle of rights to a particular property. If the sale of collateral does not collect enough money to pay off the debt, the lender can often obtain a deficiency rating against the borrower for the remaining amount.
The reciprocal of guaranteed debt is unsecured debt, which is not connected with certain property sections and vice versa creditors can only fulfill the debt to the borrower rather than the borrower's and borrower's guarantee. In general, secured debt can attract lower interest rates than unsecured debt because of additional security to lenders; However, credit history, ability to pay, and expected returns for lenders are also factors affecting interest rates. The term 'secured loans' is used in the United Kingdom, while in the United States it is better known as 'secure debt'.
Video Secured loan
Destination
There are two goals for secured loans. In the first objective, by extending the loan through securing the debt, the creditor is exempt from most of the financial risks involved as it allows the creditor to take ownership of the property if his debt is not repaid properly. Instead, this allows a second goal in which the debtor may receive a loan on more favorable terms than is available for unsecured debt, or for an extended credit in the circumstances when credit under unsecured debt terms will not be renewed at all. Creditors can offer loans with attractive interest rates and repayment periods for guaranteed debt.
Maps Secured loan
Type
- A mortgage loan is a secured loan in which the collateral is a property, such as a house.
- Nonrecourse loans are secured loans where the collateral is the sole security or claim that the creditor grants against the borrower, and the creditor has no further guarantee of the borrower for any deficiencies remaining after confiscation of the property.
- A foreclosure is a legal process in which the mortgaged property is sold to pay the debtor's debtor's default.
- Take over is a process in which a property, such as a car, is recovered by the creditor when the borrower does not make a payment due on the property. Depending on the jurisdiction, it may or may not require a court order.
UK Secured Loans Market
Prior to the global economic crisis of 2006, the Financial Services Authority (OJK) predicted that the secured lending market in the UK had a net worth of Ã, Â £ 7,000,000,000. However, after the closure of Lehman Brothers' sub-prime lender BNC Mortgage in August 2007, the most prominent secured loan providers in the UK were forced to withdraw from the market.
UK Guaranteed Loan Market Schedule (Following Global Credit Crisis)
August 2007 : Lehman Brothers closes its sub-prime lender, BNC Mortgage. September 2007 : Personal Loans for the South Pacific and London Mortgage Companies are closed. Kensington Mortgages pulled out of the secured loan market a day later. October 2007 : White Label Loans was launched to fill the vacancy left by South Pacific Personal Loans, Kensington Personal Loans and Money Partners. The product launch was piloted by Beech Finance Ltd and Specialist Financial Services Ltd April 2008 : London Scottish Bank closed all lending divisions. May 2008 : Future Mortgages announces that they will be closed for business. June 2008 : Financial Images stopped trading in this sector. July 2008 : Barclays stopped selling secured loans through FirstPlus. September 2008 : Lehman Brothers announces bankruptcy. November 2008 : Bank of America subsidiary, Loans.co.uk ceased trading. December 2008 : The subsidiary of West Bromwich Building Society, White Label Loans closed its doors to new business just fourteen months after launching and completing a £ 60 million guaranteed loan. August 2009 : Finance & amp; The Leasing Association (FLA) report that guarantees loan loans has fallen by 84% since 2008. October 2010 : MP George Justice drafts Guaranteed Loan Reform Bill. December 2010 : Finance & amp; The Leasing Association (FLA) revealed secured loan loans fell to  £ 16 million.
October 2011 : Whiteaway Laidlaw Bank joins First Commercial Loans and Links to create a new creditor, Shawbrook Bank. February 2012 : Special lenders, Equifinance enter the market. May 2012 : The Guaranteed Loan Reform Bill failed to pass Parliament. July 2012 : The first Guaranteed Index of Loans in the UK was launched by secured loan brokers, Warehouse Loans, and revealed secured loans in the UK reaching Ã, £ 150 million in the first half of 2012. September 2012 : Secured loan is now worth Ã, Â £ 350,000,000. December 2012 : Lender Secured Borrower Nemo Personal Finance launches the lowest rate ever on the secured loan market of 5.592% per annum for employed applicants and 6.54% per annum for self-employed applicants. February 2013 : Shawbrook Bank launches secure loan products that enable loans of up to 95% of property value
On April 1, 2014 , the Financial Conduct Authority took over the official regulations of the consumer credit market including secured loans. Previously, secured loans fell under the Fair Trade Office and companies that issued and brokered secured loans did not require authorization from the FCA. FCA involvement dramatically alters secured loan landscapes by putting more protection for consumers.
On March 21, 2016 The FCA introduces The Mortgage Credit Directive which means all the first cost and cost of the two mortgage contracts are treated in exactly the same way. MCD was established to protect consumers by setting up the first and second mortgage markets (as well as purchasing-for-consumer purchases) under the same regulation, and to provide approaches aligned with mortgage regulation across the EU. After the introduction of MCD mortgage brokers and advisors are required to inform their clients that a second cost mortgage could be a better alternative for remortgage or further increases.
United States Act
The United States is a global leader in security law concerning personal property; in the 1940s, it was the first country to develop and enforce the idea of ​​"integrated" security interests. The concept has spread to many countries around the world once it is proven that it is one of the reasons why the United States has the strongest economy in the world. For example, to raise money, American breeders can promise personal property like cattle in a way that is historically impossible or very difficult in Uruguay or most other developing countries. However, US law related to security interests in real property is still very chaotic and not uniform. The Uniform Law Commission of the 1970s and 1980s worked hard to develop a uniform action to clean it up but the project was a catastrophic failure.
In the case of real estate, the most common form of secured debt is the lien. Liens can be made voluntarily, such as mortgages, or created accidentally, such as mechanical lien. A mortgage can only be made with the written consent of the rights owner, regardless of other facts of the situation. Instead, the main condition necessary to create a mechanical lien is that real estate is somehow repaired through the work or material provided by the person who applied for a mechanical lien. Although the rules are complicated, the rights owner's approval of the mechanical lien itself is not required.
In terms of private property, the most common procedure for securing debt is regulated under Article 9 of the Uniform Commercial Code (UCC). This uniform action provides a relatively uniform inter-state system and the filing of public documents in which creditors assign priorities to their security interests in the debtor's property.
In case the underlying debt is not properly paid, the creditor may decide to recoup the interest to take the property. Generally, legislation enabling secured debt to be created also provides a procedure in which the property will be sold at a public auction, or through some other means of sale. The law generally also entitles redemption, in which the debtor may arrange for late debt repayment but retain property.
How to make secure debt
Debts can be secured by contractual arrangements, legally based lien, or lien penalties. The contractual agreement may be secured by a Money Purchase Interest (PMSI) loan, in which the creditor takes the security interest in the purchased goods (ie vehicles, furniture, electronics); or, a No Interest Purchase Interest (NPMSI) loan, in which the creditor picks up a security interest in an item that the borrower already owns.
See also
- Bankruptcy
- Capital structure
- Arbitration of debt
- Loan guarantee
- Second loan loan
- Seniority (finance)
- Senior debt
- Subordinated debt
- Loan title
- Unsecured debt
References
External links
- Mortgage Law
Source of the article : Wikipedia
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