What is the difference between a secured and unsecured loan?


A secured loan means there is some form of collateral (guarantee) made to the bank. Examples of collateral include your property, car, stock portfolio, gold assets, etc. The value of the collateral must exceed the loan amount. If you do not repay the loan as agreed, the bank has the right to seize the collateral.

An unsecured loan does not require collateral. There is no guarantee beyond your signed loan agreement (which is a legally binding contract).

In general, unsecured loans have a higher interest rate than secured loans.