 Hi, it's Whelan, and I'm going to explain the basics of an unsecured loan versus a secured loan So let's look at a simple example. So that's that's me And that's you and one day I a little short on money and I asked you to borrow some money so I can Have some lunch And you kindly agree to give me 20 bucks. There's the 20 bucks there Hand it over to me And I and I promise to pay you back the next week I take the money Get a nice salmon and asparagus lunch. I eat the lunch and it's all gone And next week rolls around and I say that sorry I can't pay you back So you're not too happy about that Now the the only legal recourse you have is to is to sue me So I so I say I'd go ahead. I don't care The problem with with Sue and me or or anyone is that the the litigation process Is is not a fun process to go through first of all It is uncertain process You never you never know what the outcome will be no matter how strong you think your case is The second thing is that it's a very lengthy process It takes, you know, quite a bit of time for a case to to go through The the all the different steps that that that have to be done before something can make it to trial and The last bad thing about litigation is that it's costly because it's lengthy You might incur a bunch of legal costs And there are other various fees involved in the litigation process. So With an unsecured loan if the person doesn't pay You're you're just left left with the the bad the bad alternative of of suing them a Better way of lending money Instead of with an unsecured loan is with a secured loan So a secured loan involves taking some sort of asset as collateral the most basic form of security interest is called a pledge So that's that's me again and you and I asked to borrow some money You give me the $20 So now I Not just promised to pay you back the following week I also I take the shoes off my feet and I hand them over to you I give you my shoes as collateral for the loan So you actually have possession of the shoes while I still owe you money So the money is still spent on the lunch and the following week. I say again that I can't pay you back Now you're still not happy but at least now you have you have my shoes and You have the right to sell off my shoes on Craigslist or wherever else and to use that money To pay to pay back the loan So you're happy But you know, there is something wrong with this transaction. There is a practical problem with this transaction and that problem is that I Have no shoes as long as the loan is outstanding. So I have no shoes to wear so This type of security interest a pledge only works practically speaking if The debtor the person borrowing the money does not need the use or possession of the collateral During the loan So if it's something that you don't need to have or to use during the loan then then a pledge would work so things like You know stocks that you own or or or precious metals or insurance policies or jewelry that you don't your precious jewelry that you don't wear All of all that kind of stuff would be a good kind of collateral to be used as a pledge And by the way, a pledge is the type of security interest that is used by a pawn shop when you borrow money When you give something to a pawn shop and they hold it as security for for a loan that you receive from the pawn shop Another type of security interest that can be used is called a chattel mortgage So this a chattel mortgage Actually solves the practical problem that we saw with the with the pledge So if if we are using collateral that the the borrower needs to retain the possession or have the use of You know such as such as the shoes then a chattel mortgage would work So we still start with the borrower that is me and you're you're the lender I borrow money for lunch You agree to give me the money Now I promise to pay back pay you back the next week, but instead of handing over the shoes to you I I give you a security interest called a chattel mortgage over my shoes money is used for lunch And once again, I can't pay you back Now when I can't can't pay you back You have a right to take the shoes away from me to to repossess my shoes and to sell them In order to use the money to to pay off the loan So you're happy So the The way this is set up with the chattel mortgage I still get to wear my shoes while the loan is loan is outstanding And you you still have a security interest over some collateral that you can that you can take if I default on the loan