Business, Legal & Accounting Glossary
A debt on which a creditor has a lien. The creditor can institute a foreclosure or repossession to take the property identified by the lien, called the collateral, to satisfy the debt if you default. Compare unsecured debt.
Secured debt is a kind of debt that is secured or backed by collateral to scale down the risk linked with lending. The borrower pledges some asset (land, vehicle or any other) as collateral for a loan that becomes known as a secured debt to the creditor granting the loan. The debt is therefore secured against a collateral-that can be taken into possession by the creditor. The creditor may then sell it to regain the monetary amount that he or she has earlier lent to the borrower.
Secured debt posses greater financial safety than unsecured debt. Apart from the presence of collateral, the borrower may receive loans on more auspicious terms than those available in case of unsecured debt. Repayment periods and interest rates are also made more attractive for secured debt when compared to unsecured ones. Secured debts are implemented by a contractual agreement.
A blanket mortgage is a type of mortgage that encompass two or more real estate pieces. The total estate is taken as collateral, but individual pieces of real estate may be sold without breaking the integrity of the mortgage. Blanket mortgages are taken by land developers who typically procures large properties with the aim to develop the land and then sell sub-plots to individual house-holders or end-users of the land.
It is the risk that individuals or companies will not be able to pay their debt obligations. Debt obligations include both principal and contractual interest. The creditor may not get his or her money back.
It is a two-sided lending understanding, where the note expresses a contractual obligation to borrow and lend money at a particular interest rate. A secured note is a standard lending accord. These type of notes have additional safeguards incorporated into them to lessen the risk of default and to put extra value.
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This glossary post was last updated: 22nd April, 2020 | 0 Views.