Secured vs. Unsecured Credit

Secured credit involves a loan backed by collateral, such as a house or car, which the lender can seize if you fail to repay. Unsecured credit, like most credit cards or personal loans, doesn’t require collateral; approval relies more on your creditworthiness. Secured loans generally have lower interest rates due to the reduced risk for lenders, but you could lose the collateral if you don’t repay. Unsecured loans may have higher rates and stricter approval criteria, but you don’t risk losing specific assets if you default.