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ARTICLE · 02 APRIL 2025

Critical Consequences: What Happens If A Borrower Defaults On A Secured Promissory Note?

Ayala Law
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When a borrower takes out a loan secured by collateral, they sign a secured promissory note—a legal contract that outlines their promise to repay the debt.

United StatesFinance and Banking
Eduardo A. Maura
Eduardo A. Maura

When a borrower takes out a loan secured by collateral, they sign a secured promissory note—a legal contract that outlines their promise to repay the debt. But what happens when a borrower fails to make payments? If you're a lender or borrower dealing with a loan default, understanding your legal options is critical.

This blog post breaks down what happens when a borrower defaults on a secured promissory note, what lenders can do to recover their money, and how borrowers might protect themselves.

What Is a Secured Promissory Note?

A secured promissory note is a legally binding agreement where a borrower agrees to repay a loan, and the lender holds collateral as security in case of default. The collateral can be:

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