What it is:
Secured creditor is athat provides collateralized .
How it works (Example):
Here's another example: You would like to borrow $100,000 to start a business. Even if you have an excellent credit rating, a bank may be reluctant to lend you the money because it may be left with nothing if you default on the . Thus, although banks may attempt the lengthy and expensive process of suing you in that circumstance, the bank may require $100,000 of collateral in order to lend you the money. This collateral might consist of financial instruments, houses, , or even objects such as art, jewelry, or other items. You might also pledge your business receivables. When you pledge these assets, you are making the a secured creditor.
Why it Matters:
Secured creditors often provide lower interest rates than unsecured creditors because they have loan is often a matter of negotiation between the and borrower. For instance, a lender might require a borrower to collateralize any assets purchased during the loan period. In some cases, collateral for one obligation can also be collateral for other obligations (this is called cross-collateralization). This often occurs in real estate transactions, where a house collateralizes more than one .on their side. They less risk as a result. However, the type and amount of security required for a given