A secured loan, in simple words, is a type of loan that is backed by collateral, which is an asset that the borrower pledges to the lender. The borrower needs to pledge a valuable property; can be a car, home, land, etc. Because the loan is secured by an asset, lenders are more willing to offer lower interest rates, making it more affordable for borrowers. Remember, if the borrower fails to repay the loan, the lender has the right to seize the collateral to recover the amount owed. This reduces risk for the lender and provides borrowers with better loan terms.