You will usually have two options for personal loans which include a secured loan or an unsecured loan. An easy way to think of it is this: a secured loan uses collateral where an unsecured loan doesn’t. But we’ll give you more than that. Let’s explore the difference between a secured loan vs. an unsecured loan.
Secured LoanIn simple terms, lenders like secured loans because they’re lower risk. These loans are primarily used for larger loan amounts to be used for the purchase of a car or a house. With secured loans usually comes lower interest rates, too. What is considered a secured loan?
- Car loans
- Real estate
- Insurance policies
Unsecured LoanAn unsecured loan works based on your creditworthiness, or your ability to make consistent payments. This might mean paying a bit more interest than a secured loan. Choosing an unsecured loan can also help boost credit scores. What is considered an unsecured loan?
- Student loans
- Credit cards
- Personal loans