A secured personal loan requires a borrower to use their home, car, or other valuable assets as collateral for the loan.

If you do not repay your loan, the lender has the right to sell or repossess your property. If you default on a secured personal loan, you will lose the money from that particular loan and any equity in the asset used to secure it.

A secured loan

Secured loans are loans that typically have lower interest rates than unsecured loans and can be easier for borrowers to qualify for.

A secured loan necessitates the borrower to put up collateral (i.e., a car, property, or other valuable assets) as security in case of default on the borrower’s part.

The most popular type of secured personal loan is one where your vehicle serves as collateral. In this scenario, if you stop making payments, then your lender can repossess and sell off your car until they’ve recuperated their losses.

A second common form of secured personal lending involves real estate: If you borrow money against an existing property, say by taking out an equity line of credit against it, then this will count as “secured” because there will be no doubt about what happens if you default on payments (the lender takes possession).

A secured loan reduces the lender.

If you default, the lender can take your property. A lender can repossess the property to pay off the loan if you default. This loan is used for car purchases but also other loans.

To be approved for this kind of loan, a borrower typically needs a solid credit history, evidence of income, and a down payment.

Unsecured loans are collateral-free.

Despite not requiring collateral, it might be harder to qualify for than a secured loan due to the lender’s lower risk. Because the lender is taking on more risk, the interest rates are higher than on secured loans. A secured loan is simpler to qualify for because of its lower risk, but you’ll end up paying more in interest over time. Consider how much money you want or need and how long it will take you to pay back your balance before deciding which type of loan best suits your needs. Then, consider whether those factors favor one option over another.

Borrowing without collateral is possible.

Secured loans are easier to get. Because you can use a house or car as collateral for a lower loan rate. If you take out a $10,000 personal loan at 7% and have $20,000 in home equity, it will cost you $283 per month to pay it back. Most people don’t have enough money or assets to secure a secured loan, so consider unsecured personal loans. Unsecured personal loans cost less because the borrower doesn’t need collateral. They may require more paperwork and credit checks than secured loans. Even those with bad credit can qualify! If this is the case, we suggest getting quotes from multiple lenders before choosing one.


If you want money but don’t have the collateral to get a loan or want to borrow more than would be possible with a secured loan, then an unsecured personal loan might be right for you.

This is a perfect option for borrowers with bad credit or no credit, who can use the loan to pay off existing debt or make purchases they otherwise couldn’t afford.

We recommend using our comparison tool to get quotes from multiple lenders to find one that offers the lowest interest rate and fees.