How does a secured loan work?

secured loan

I’m looking to start up a business, and borrowing money from my dad. He has the liquid, would a secured loan be good or a business loan?
10k loan, he has the funds I just need it for 6 months or less. It will be paid in full then.

Passive Income
Categories : secured loan



A secured loan means that you give that person the right to take something of yours that has value, if you don’t pay. Usually it’s a house or real property.

If you don’t know what a secured loan is, you should probably not be trying to start your own business until you have a little more business knowledge.


What do you mean “he has the liquid?” I assume you mean your Dad has a lot of cash or cash equivalents on hand?

How much do you want to borrow? What assets do you have available to pledge against the debt? A lot of factors here depending on what your borrowing needs are.


Son, I don’t mean to embarrass, but you are using some terms wrong, so your question I’ll rearrange in my head. A secured loan is any loan, where the debt is backed up by collateral. When you get a car loan, that is a secured loan, because the car is the collateral that “secures” (backs up) the loan. So Dad has some cash and you want to borrow some of it to start your business right? You ask if a SECURED loan would be as good as a BUSINESS LOAN. Let’s focus on unraveling ok?

A “Business Loan” is any loan made by anyone to a business (not to a person) If the loan is in your name, it’s a “Personal Loan”. Business loans generally, but not always, are made by a financial institution. A minority of Business Loans are made a person.

Let’s forget for now what you are gonna call it! You want to borrow from dad. Now if you ask your dad for a loan to start a business, he has several choices.
1) He can say NO.
2) He may ask what kind of collaterial you can put up to
secure (back) the loan. I assume you have none.
2) He can say yes.

What it comes down to is not what we call it, is it a business loan or not. It comes down to your relationship with your father, and his true financial picture. Most fathers (me included) are reluctant to discuss their finances with their kids unless they are ill.

You see you are getting hung up on semantics & the wording. Skip that c stuff. There is a survey done by Harvard University, they choose
200 college students and 200 fathers, and while not really scientific, they asked the students to estimate their father’s salary/income. I don’t remember the exact number, but I do remember that it was a large majority of the students, grossly overestimated dear Dad’s income. At the time I was one of the students.

So what do we know? We know that the question you asked isn’t exactly what you want to know.

If you deceide to ask Dad, the first thing you have to do is to gather as much information as you can on the type of business you want, is there a market or need for it in your community, how much money will it take, etc., etc. What I’m saying is be prepared! Don’t just say, “Yo Pops, I need some bucks”. If you ask that, I will guarantee his answer.

I hope, my friend, that I’ve casused you to think a little more about it!
Good Luck (for real)

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