Getting a Secured Loan on Real Estate

The borrower could be left holding a property that is worth significantly less than they owe on it. If the renovations take longer than expected and the borrower has reached the end of his loan term, that can also push the first loan into default. When lending on real estate as a private lender, having the collateral of the property makes this a secured loan. A secured loan means there is an asset to cover the capital put out to acquire that asset. In this lending scenario, there isn't an asset to back the $20,000 lent out. There is no guarantee the borrower won't take that money to Vegas.