Keep in mind, with a secured loan or line of credit, the lender can take possession of the collateral if you don't repay the loan as agreed. PandaTip: This is a basic collateral agreement template. The collateral is an item or property that can be taken if the borrower fails to pay back the loan within its terms. With a mortgage, the home you purchase secures the loan you need to buy it. However, secured personal loans usually carry a higher risk to the borrower for the same reason. Unsecured Loans: Definition and Explanation. SECURED LOAN AGREEMENT SECURED LOAN AGREEMENT (as amended, supplemented or otherwise modified from time to time, the “Agreement”), dated as of July 26, 2001 (the “Effective Date”), by and between REED KRAKOFF, a natural person residing in the State of New York (the “Borrower”) and COACH, INC., a Maryland corporation (the “Lender”). This difference affects your interest rate, borrowing limit, and repayment terms. Plus, secured loans and lines may have lower interest rates, larger loan amounts, or better terms than unsecured loans. The collateral you can use depends on the loan, but generally speaking, you can get a secured loan using collateral like a car or home you own, or equity in either. For example, a bank may take some stocks and bonds from a person in exchange for a loan. In most cases, you’ll need a separate loan agreement to define the terms of repayment for the listed debt. This collateral-backed or secured loan usually has a lower interest rate because of the asset offered. Unsecured loans are loans that are approved without the need for collateral. However, if the collateral tied to your secured personal loan is repossessed or confiscated, this will add even more negative marks to your credit history. The account must be with Wells Fargo to qualify. If you pledge an asset as collateral, your lender has the right to take action (assuming you stop making payments on the loan): they take possession of the collateral, sell it, and use the sales proceeds to pay off the loan. In the case of a secured loan, the interest rate is lower since the borrower keeps one of her assets as collateral. Secured loans that can be used for nearly anything A secured loan uses an owned asset to "back" the loan - like your car or a house. This acts as collateral that the lender can claim if you default on your loan. Home loans: Whether you borrow for your home purchase or you get a second mortgage, you risk being forced out of your home through foreclosure if you fail to repay the loan.