Loan Education
Secured vs. Unsecured Personal Loans: What's the Difference?
A secured personal loan is backed by collateral — like a savings account, CD or vehicle — that the lender can take if you don't repay. An unsecured loan has no collateral, so approval and pricing rely on your credit. Secured loans may be easier to get or cheaper, but put your asset at risk.
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Side-by-side comparison
| Secured personal loan | Unsecured personal loan | |
|---|---|---|
| Collateral | Required (savings, CD, vehicle, etc.) | None |
| Approval | Can be easier with limited or fair credit | Depends heavily on credit and income |
| Rates | Often lower | Often higher for the same borrower |
| Risk to you | You can lose the collateral | Credit damage, collections, possible lawsuit |
| Speed | May take longer (collateral must be valued) | Often faster |
Common types of secured loans
- Share-secured or CD-secured loans: borrow against money you have on deposit, often at banks and credit unions. These can be a low-risk way to build credit.
- Auto-secured personal loans: use a car you own as collateral.
- Home equity loans and lines of credit: use your home as collateral; the risk of losing your home makes these a serious decision.
When a secured loan may make sense
- You have limited credit history and want to build it.
- You can't qualify for an affordable unsecured loan.
- You're confident in your ability to repay and comfortable with the risk to the asset.
When unsecured may be better
- You have good credit and can get a competitive rate.
- You don't want to put an asset on the line.
- You need funds quickly.
Questions to ask before deciding
- What exactly happens to my collateral if I miss a payment?
- How does the APR compare between the two options for the same amount and term?
- Are there fees for valuing or holding the collateral?
- Can I afford the payment even if my income dips?
Compare real offers in the Loan Comparison Tool, and read our full guide to personal loans.