Secured Loan

A loan backed by collateral — an asset that the lender can seize if the borrower defaults. Vehicle loans and mortgages are common examples. Example: A Kisii farmer takes a KES 800,000 secured loan to buy dairy cows, using his 2-acre plot as collateral. He gets a lower interest rate of 13% compared to 24% for an unsecured loan, but risks losing his land if he cannot repay.