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Definition

Secured and Unsecured loan

Loan/Advance may be secure or unsecured.Secured loans are those loans that are protected by an asset or collateral of some sort. A secured advance means:

  1. Advance made the security of tangible assets like goods, building, stock exchange securities etc. and
  2. The market value of security must not be less than the amount of loan at any time till the loan is repaid.                                                                                                                                                                                                                                                 An unsecured loan or advance means of loan or advance not so secured.

Though both in case of secured and unsecured advances the bank gives emphasis on credit worthiness of the borrower but in case of unsecured advances this is all the more.An unsecured loan is not protected by any collateral. If one default on the loan, the lender can't automatically take property. The most common types of unsecured loan are credit cards, student loans, and personal loans. The bank must carefully examine the three C’s i.e. character, capacity, and capital of the borrower.

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