Loans can be divided into two categories: secured loans and unsecured loans. First is important to know that loans are a type of debt.
Secured loans are a type of loan that is made when the borrower guarantees with an asset. The asset used for the loan is called collateral. This means that once the loan is accorded, if the borrower is not able to pay the interest rate of the loan, the creditor takes away from him the collateral guarantee an sells it to recuperate the sum of money that he has given to the borrower. Usually the asset that guarantees for the secured loan has a big value and can be a car, a house or a business of the borrower, when the asset is sold to recuperate the money is called foreclosure.
In the case of secured loans, the creditor has rights on the assets once the loan is made, and once he decides to sell it is a legal proceeding.
Secured types of loans are mortgage loans, non-recourse loans, and in the case of these types of loans, the guarantee is usually a house. When the house is sold by the creditor, and the foreclosure happens, in many cases the creditor needs a court order for this, but this depends very much from the laws of the country or the state where the foreclosure happens. Unfortunately, in this case the borrower can do nothing, except the fact that he pays the monthly interest rates that he has to pay to the creditor.
Secured types of loans are usually accorded in case of big financial problems and the consequences and conditions of the creditors can be very serious.
In the case of unsecured loans there is no asset needed for guarantee, just the monthly salary of the borrower. Types of unsecured loans are personal loans, loans given to resolve credit card debt and loans for other types of small expenses. If there is no serious propriety needed to guarantee the repayment the court is not implied in this kind of proceeding and the interest rate is fixed, after a mutually agreement that happens between the creditor and the debtor. The federal court is implied in the process only in cases when the borrower does not pay his monthly rates, in this case, the creditors can intend legal action against him, and after the legal proceeding is over the borrower needs to give the money back. But this can be a difficult situation, because there is no guarantee that the creditor will get his money back and these kinds of legal actions can go through several years.