The secured creditor is a natural or legal person whose right to payment is backed by a guarantee . This can be, for example, a mortgaged house or other attachable property.
Thus, in case of default, the creditor can execute the guarantee and ensure the repayment of the credit granted. Although the protection is not necessarily complete. That is, the entire loan is not always recovered, but only a part.
It should be remembered that a creditor is any individual or company with the power to demand the fulfillment of an obligation. This term is used especially for loans extended by financial institutions.
It is worth mentioning that the guarantee is, in general, a mechanism to protect the rights of a lender. Thus, with the backing of a third party or of a good (that can be sold to obtain liquidity ), the compensation or reduction to the maximum of possible damages produced by the debtor is ensured.
Types of secured creditor
There are two types of secured creditor:
With full guarantee: If the debt owed by the creditor is fully covered. This happens, for example, in the case of mortgage loans where the guarantee is the home itself.
With partial guarantee: If only the fulfillment of a part of the obligation of the debtor is ensured. Suppose, for example, that the loan has been US $ 20,000 and the guarantee presented is a car with a value of US $ 10,000.
Key aspects of the secured creditor
Among the key aspects of the secured creditors is its presence in high-value operations, such as mortgage loans . In this way, financial institutions reduce the risk of their activity.