What is the difference between unsecured and secured personal loans?
Apply for a Loan
Secured with SHA-256 Encryption
UPDATED: Sep 9, 2011
Advertiser Disclosure: We strive to help you make confident loan decisions. Comparison shopping should be easy. We are not affiliated with any one loan provider and cannot guarantee quotes from any single provider. Our partnerships don’t influence our content. Our opinions are our own. To compare quotes from many different companies please enter your ZIP code on this page to use the free quote tool. The more quotes you compare, the more chances to save.
Editorial Guidelines: We are a free online resource for anyone interested in learning more about loans. Our goal is to be an objective, third-party resource for everything loan related. We update our site regularly, and all content is reviewed by experts.
For individuals in need of cash fast, personal loans can be a quick short-term solution. There are two different types of short-term personal loans, secured and unsecured.
If a personal loan is secured, the borrower has put up an asset, such as property, as collateral if he or she fails to make payments, in which case the lender can possess that asset as replacement payment. Most commonly, the asset is the borrower’s home or car, but it can be anything that he or she owns that is of a high enough value.
This financial insurance usually allows the lender to grant a loan with a greater amount and a lower interest rate. This option is also beneficial for borrowers with poor credit, as the asset provides a concrete guarantee that the lender will receive payment. It may also provide enough insurance to allow you to pay off the amount over a longer period of time.
An unsecured loan is an option when the borrower does not have or does not want to risk their property to pose as collateral. Because the lender does not have the financial security of collateral, they often will set higher interest rates and may also charge fees and penalties. The amount the lender grants will also most likely be lower and to be paid back over a shorter period of time.