Secured vs Unsecured Loans

Secured loans are borrowing agreements backed by collateral—something valuable like a house or car—that the lender can claim if you fail to repay. Unsecured loans, on the other hand, do not require collateral; approval depends more on your creditworthiness, making them riskier for lenders and often resulting in higher interest rates. Examples of secured loans include mortgages and car loans, while personal loans and credit cards are typically unsecured. The main difference is the presence or absence of collateral, influencing the loan’s eligibility, interest rates, and potential consequences if you default.