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What is the difference between secured and unsecured loans?

Secured Loans versus Unsecured Loan: Which one is better?

We get myriad of options when we want to take a personal loan. The difficult part lies in taking a decision regarding the type of personal loan to take that suits our budget.

There are two types of Personal Loans.

  • Secured Loans

  • Unsecured Loans

If you are still unsure about the difference between the two, we will help you.

What is the difference between secured and unsecured loans?

There are both advantages and disadvantages of Secured Personal Loans and Unsecured Personal Loans. It is advisable to first know your budget and your property value before going for the Loan.

  1. Unsecured Personal Loan: It does not require you to surrender any kind of collateral. So you do not live in the constant fear of losing your valuable asset if you fail to pay your Loan amount. You have flexibility to choose your tenure of the Loan, during which you can repay it. However there are certain restrictions in this case as most of the banks urge customers to repay between one to five years of taking the Loan. Certain criteria like waiving off instalments for the first few months entirely depends on what type of borrower you are approaching. If you look closely, with such advantages it has major disadvantages as well.

It has higher interest rates than the Secured Loan. You need to have good credit history in order to get Unsecured Personal Loan. Banks are usually hesitant to give Unsecured Personal Loan to one who has low credit score. Failing to make timely payments can result in accumulation of high interest charges on your Loan as the rate of interest is quite high in the Unsecured Personal Loan.

  1. Secured Personal Loan: It requires to surrender something valuable to the lender as a collateral till you make the final settlement of the Loan

Collateral could be:

  • Property

  • Car/Boat

  • Jewellery etc.

It also has some Pros and cons.

The Pros of Secured Personal Loans:

It has lower interest rates compared to Unsecured one. So, you will be benefited more if you have opted for a long term Loan. It has higher borrowing limits. It doesn’t require very good credit score. It involves surrendering of the collateral that makes it more appealing to the lenders to give the loan easily even with an average credit score.

The Cons of Secured Personal Loans:

Failing to repay your Loan amount can result in loss of your valuable. Collateral will be repossessed by the lender.


Whatever type of Loan you go for, what is necessary is your financial assessment and knowledge of money management. Loan is also a kind of debt, a reliability that banks owe you. Be sure about the following factors.

  • Credit history.

  • How much monthly instalments you can afford so you don’t default.

  • Collateral you possess.

Decision is entirely upon you. Check with big banks and financial institutions for their interest charges and terms and conditions to avoid debt trap or Log into and let our experts assist you in getting a loan that is best for you and suits your budget.

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