The Difference Between a Secured Loan and an Unsecured Loan

By on March 12th, 2019

what is secured loan

Are you thinking of taking out a secured personal loan? If yes, so you are at the right place to get as much information as you need about this type of a loan. We will try to make that process clearer to you but you should know at least basic loan terms and their definitions to understand what you are talking about. We also remind you about some disadvantages that may suddenly occur on your way. Moreover, we will cover the positive side too but people should be first aware of the disadvantageous part of it.

At the very beginning, let’s determine what a secured loan stands actually for. A secured loan is money you are going to borrow from a bank, credit union or an online direct lender. Why is it secured? Because of the collateral that is incorporated in. Hence, for getting approved for a secured personal loan, you must use the collateral that serves as the guarantee that you will return money back.

Is a Personal Loan a Good Solution to Your Problems?

Telling the truth, it actually is. We never are prepared for some unpredictable situations to arise. It is the bitter truth. With everyday expenses and chores, we always cannot save some extra dollars for a retirement package or something else.

It is not surprising why a personal loan is so well-known among humanity. There are too many reasons why people tend to apply for financial help. The best solution is acting and not waiting too long to make the right decision. What you need to do is start searching for the website from where you can borrow the necessary amount of money.

What Is the Difference Between a Secured and Unsecured Loan

Hopefully, you heard something about an unsecured personal loan as well. This is another type of loan that has some varying characteristics. As you have already understood the meaning of a secured loan, you can make an assumption that an unsecured loan is something totally different. And you are right. You don’t need the collateral to take out a loan. Although you are at less risk, your interest rate will be much higher. The other thing you should know is that your credit history directly affects whether you are approved or denied. So here you must own a good credit score which isn’t obligatory for applying for a secured loan.

Which Benefits Do People Get While Taking out a Secured Loan?

Absolutely, people contribute a lot. Let’s look at some advantages:

  1. Big loan amount. Usually, you are entitled to borrowing that amount of money that your collateral values. However, it is risky to do. If you cannot pay it off, you will lose your property or other collateral you pledged.
  2. Duration of your repayment. It is usually longer up to 20 years depending on the collateral and the type of a secured loan. Longer payment period will give you a chance to decrease your interest rate.
  3. Quick and easy approval. It can take up to a few minutes if the lender sees what collateral you use.

Therefore, this kind of loan is pretty good when you follow the instructions and don’t miss payment periods. If you do so, you can easily lose your house or car whatever you used as collateral.


If you don’t have a job it doesn’t mean that you can’t take a loan. Read a piece of advice about Loans for Unemployed


Now, pay attention to some kinds of a secured loan. They are:

  1. Savings secured loan.
  2. Certificate secured loan.
  3. Cash secured loan.
  4. Secured loan from a bank.
  5. Deposit secured loan.

What Is a Savings Secured Loan?

In that way, your savings account or money market stands for the collateral. In return, you get approved and receive your money. You pledge part of your savings account. Then, the lender controls how you pay it off. If you don’t repay a loan, he can increase the interest rate.

What Is a Certificate Secured Loan?

It is offered by credit unions. To get a loan, you should provide the certificate as collateral and only after that you will be approved. You don’t risk the money on your savings account.

What Is a Cash Secured Loan?

You can take out a loan from a bank where you have a savings account. The direct lender will require you to pledge your cash savings as collateral. If you don’t pay it off, the lender will withdraw money from your account.

What Is a Secured Loan from a Bank?

A secured loan obliges the borrower to pledge some asset as collateral. Further, that collateral becomes a secured debt that you should repay to the bank within specific deadlines.

What Is a Deposit Secured Loan?

It is suitable especially for young people who prefer to improve their credit scores. This loan is secured by money that is in your account.

We really hope that our article was very informative to you. These were some important things that you had to be aware of when deciding on taking out a secured loan.