There are a couple factors that go into deciding on a secured vs. unsecured loan. A secured loan is normally easier to get, as there's less risk to the lender. If you have a poor credit history or you’re rebuilding credit score, lenders will be more likely to consider you for a secured loan than an unsecured loan.
SECURED LOAN VS. UNSECURED LOAN: WHAT’S THE DIFFERENCE?
When you’re borrowing money, you'll likely need to make a decision about a secured loan vs. unsecured loan. What's the difference? To be a smart borrower, it’s important to understand each loan option available to you. Loans are either secured or unsecured. Here’s an explanation about choosing a secured loan vs. unsecured loan.
A secured loan usually also has lower interest rates. That means a secured loan, if you can qualify for one, is usually a smarter money management decision vs. an unsecured loan. And a secured loan will tend to offer higher borrowing limits, enabling you to gain access to more money.
An unsecured loan is not backed by any collateral. Due to the lack of collateral, the lender faces a higher level of risk. Because of this, the interest rate may be higher and the borrowing limit may be lower. If you default on the loan, the lender can't automatically take your property. The most common types of unsecured loan are credit cards, student loans, and personal loans.
KNOW BEFORE YOU BORROW
Both loan types have strengths and weaknesses, which can vary per borrower and lender. If you plan to apply for a loan, try to have a clear understanding of which option works best for your unique financial situation. Before you make any borrowing decision, make sure you can afford to pay back your loan in a timely matter without straining your budget.