Secured loan

A secured loan is a type of loan in which the lender requires collateral to protect against the risk of non-payment. Essentially, the financial institution can repossess the secured asset—such as your car or house—if you stop making payments. An installment sales contract is also considered a secured creditor. Another financing method similar to an installment sales contract is leasing. Like a secured loan, the lessor (leasing company) can also repossess the asset if you default on payments, but you will be responsible for any loss they incur. Note that if you file a consumer proposal or bankruptcy, this loss can be included in the process and you won’t have to pay it.

When you deal with a merchant to purchase a good, the Consumer Protection Act grants you certain protections. If you miss one or more payments on your loan, the merchant must give you a 30-day notice before repossessing the asset or taking legal action. The merchant then has two options: obtain a judgment for the loan amount and seize the vehicle, or repossess it, in which case the debt is extinguished. Furthermore, if at the time of default you have paid more than 50% of the debt, the merchant must obtain court authorization before initiating legal proceedings. Please note that these protections apply only to consumer purchases from merchants and not to leases.

We invite you to explore possible solutions if you have a debt related to a guaranteed loan.