What is Secured Loan and Unsecured Loan – Describe

Here in this article we describe What is Secured Loan and Unsecured Loan: If you are applying for any loan and you do not know what are secured and unsecured loans then this article is for you.

Whenever you apply for a loan, you must have heard the name of secured and unsecured loan and the question must have come in your mind that what are these loans. In this article, we will provide you complete information about secured loans and unsecured loans, so read this article till the end. Your credit history matters a lot in both Secured Loan and Unsecured Loan.

What is Secured Loan?

Secured Loan is a loan in which you have to pledge something with the lender as collateral or security. You can use house, car, purchased item, gold etc. as collateral or security. In this loan, you have to give full confidence to the lender that you will repay the entire loan amount on time, so you have to keep something with the lender as collateral.

There are many benefits of secured loan. Under this loan, you can take advantage of lower interest rate, higher loan amount and longer loan tenure. This loan is given by the lender to the applicant with a guarantee. If you do not make full payment of your loan to the lender on time, then the lender can sell your collateral to recover your money.

Some examples of secured loan are :

  • Home Loan
  • home equity line of credit
  • Car Loan
  • Mortgage Loan

Under Secured Loan , the lender gives a large amount to the applicant with the guarantee that he will repay it. A secured loan means that you are providing a security to the lender that your loan will be repaid. You get the following benefits of Secured Loan:

  • low interest rates
  • excess loan amount
  • longer loan tenure

What is an unsecured loan?

Unsecured loans are completely opposite to secured loans. In unsecured loan , the CIBIL score of the applicant matters a lot. If your credit history is very bad then no lender will give you this loan. Therefore, before applying for any unsecured loan, you have to pay a lot of attention to your credit score.

To take this loan, you do not have to give anything to the lender as collateral or security. The interest rate of unsecured loan is higher than that of secured loan. You get lower interest rate, lower loan amount and shorter loan tenure as compared to secured loans. This loan is given to the applicant by the lender at his own risk as there is no asset to recover in case of default. If your loan is rejected considering your credit history then you can apply for secured loan.

The lender takes several factors into consideration before granting you this loan such as:

  • Applicant’s credit score, character, employment history
  • Your current income, ability to repay the loan
  • money in capital or savings accounts

Unsecured loan example:

  • Personal loans
  • credit cards
  • Student loans

Secured and Unsecured Loan

Through the table given below, we can compare secured loan and unsecured loan:

secured loan unsecured loan
In this loan, you have to give collateral or security to the lender. You do not have to provide any collateral or security in this.
Compared to unsecured loans, the interest rate of this loan is low, loan tenure is high, loan amount is high. Higher interest rate, shorter loan tenure, lower loan amount than secured loans
Processing may take time as the collateral needs to be appraised. This will have a faster processing process as the collateral does not need to be appraised.
This loan is approved based on the applicant’s income, property value and other existing loans. This loan is sanctioned on the basis of applicant’s income, credit score, other existing loans.
Being secured, this loan is easy to get. Being unsecured, this loan is comparatively difficult to obtain.
This loan is given with a guarantee. In this you do not have to give any guarantee of any kind.
In this, the loan amount depends on the factors like income, collateral or security of the applicant. In this, the loan amount completely depends on the income, credit history of the applicant.
Example: Home Loan, Mortgage Loan, Car Loan etc. Example: Personal Loan, Student Loan, Credit Card etc.

Secured loan and unsecured loan – which is better?

In my opinion secured loan is better. Because this loan is secured, you get it in less time. Secured Loan (secured loan) you get at low interest rate and for a long period. In this you can take more loan amount than unsecured loan. By reading this article , comparing both Secured and Unsecured Loans , you can guess that Secured Loan is comparatively more beneficial. Due to less risk in secured loan, lenders approve your loan in less time.

Before applying for a loan in any bank or financial institution, you should cover some things beforehand. For example, if you are taking a personal loan, then you need to know about the Personal Loan Interest Rate , if you are taking a home loan, then it is very important for you to be aware of the Home Loan Interest Rate and in the same way any other. Before applying for the loan, it is very important for you to know about the interest rate of that loan.

If you do not take information about the interest rate of that loan before applying for a loan, do not calculate the EMI of the loan first, then you may have to face a lot of problems at the time of loan repayment.


In this article we have given you provided you complete information about What is Secured and Unsecured Loan . You can compare between Secured Loan and Unsecured Loan by reading this article.

If you want a loan with a lower interest rate and a longer tenure and a higher loan amount, then you can go for a secured loan. Because of the secured loan being secured, it is approved by the lender in less time. Hope you friends have found this article informative. If you liked this article then please share it with your friends.

Read more article:

Questions related to Secured loan and Unsecured loan:

Q. What are the examples of secured loan?

Ans. Home loan, car loan etc.

Q. What are examples of unsecured loans?

Ans. Personal loan, education loan etc.

Q. How to compare unsecured loan and secured loan?

Ans. This article compares both these loans. You can read this article completely.

Q. Are bank loans secured or unsecured?

Ans. The bank provides you both types of loans.

Q. What is the difference between secured and unsecured loan?

Ans. The loan in which the bank does not have any risk is a secured loan and the loan which the bank provides to the customers at its own risk is an unsecured loan.

Leave a Comment