Debt that is backed or “secured” by collateral or particular assets to reduce certain risks associated with lending; typically the property that is the subject of the loan is the security, but sometimes other property may operate as security as well. Compared Unsecured Debt.
Example: When Fred bought his used truck, Dollar Bill’s Auto Sales retained the title of vehicle until Fred could pay it off. Fred missed two payments and Dollar Bill’s repossessed the truck because it was security on the debt.
Example: In home mortgages, for example, a lender retains a certain kind of lien (a deed of trust) securing its rights to repayment. In the event a borrower defaults, the lender may then foreclose and repossess the property in the event of a default. Upon repayment of the entire debt, the lender executes a release of the deed of trust.
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