What is a secured creditor?

A secured creditor is a creditor who possesses a lien on either real estate or personal property that acts as collateral to secure a debt.

The lien on personal property would be in the form of a security interest. The lien on real estate would be in the form of a mortgage. Of course in the event of default, the secured creditor has the right to pursue that collateral to obtain ownership, liquidate it to satisfy the debt.

The collateral is not always owned by the debtor, usually but not always owned by the debtor. Sometimes the collateral is pledged by a third party. In that instance there’s usually a separate agreement sometimes called a hypothecation agreement, or other similar document to act as a pledge of collateral to secure the debt.