Compare secured vs. unsecured loans

What's the difference between secured and unsecured loans? Find out in our guide.

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A personal loan can help you if you’re in a financial bind. Whether you want to buy a car or do some home renovations, you’re likely to find a number of different lenders offering a variety of loans.

If you’re looking to purchase an asset, or you already have one, you have probably come across the terms “unsecured” and “secured” as you explore your loan options. We break down the differences between these two loans types in the guide below.

Mogo Personal Loan

Mogo Personal Loan

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  • Borrow from $2,000
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Mogo Personal Loan

Apply today to get approved for a personal loan up to $35,000 on flexible terms.

  • Max. loan amount: $35,000
  • Loan term: 1-5 years
  • Turnaround time: Same day
  • APR: 5.90% - 46.96%
  • Fees: NSF fee - $20 to $50
  • Quick pre-approval
  • Automatic payments
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Secured vs. unsecured loans

The main difference between these two types of personal loans is that with a secured personal loan, you have to provide an asset as collateral, whereas you don’t with an unsecured loan.

  • If you default on a secured personal loan, the lender can repossess the asset and sell it to recoup its losses. The asset is usually one you are purchasing with the funds you are borrowing from the lender — like a car or home — but it can also be an asset you already own.
  • If you default on an unsecured loan, the lender can send the collection agency after you.

Compare your secured and unsecured personal loan options

Name Product Interest Rate Max. Loan Amount Loan Term Fees Min. Credit Score
26.99% - 39.99%. Varies by loan type and province
$20,000
6 months - 5 years
None
N/A
Fairstone offers unsecured personal loans up to $20,000
19.99% - 35.00%
$12,500
12 months - 5 years
No hidden fees or additional costs
N/A
Online lender offering personal loans from $500 up to $12,500.
5.90% - 46.96%
$35,000
1-5 years
NSF fee - $20 to $50
540
Mogo offers loans up to $35,000 on flexible terms.
18.90% - 54.90%
$10,000
1-5 years
None
550
An established online lender with loans up to $10,000. Now accepting applicants on El and Social Assistance.
46.93%
$10,000
6 months - 5 years
Vary across provinces/territories
N/A
Cash Money offers installment loans up to $10,000 for AB, MB and NB residents.
46.93%
$10,000
6 months - 5 years
Vary across provinces/territories
N/A
Cash Money offers line of credit loans up to $10,000 fo AB and ON residents.
19.99% - 46.93%
$15,000
No end dates
None
N/A
Borrow up to $15,000, based on your income and credit history, with a personal line of credit from LendDirect.
43% (British Columbia and Ontario) and 34.90% (Quebec)
$10,000
1-5 years
None
N/A
LendingMate offers loans to Canadians with poor credit with no credit checks. Guarantor required for application.

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Name Product Interest Rate Max. Loan Amount Loan Term Fees Min. Credit Score
19.99% - 23.99%. Varies by loan type and province
$35,000
3-10 years
Varies by province
N/A
Fairstone offers secured personal loans up to $35,000.
9.47% - 19.90%. Varies by loan size
$25,000
3-5 years
Origination fee: $250 - $1,000 depending on loan size
N/A
A loan that you repay before gettּing access to the funds. Enjoy no upfront fees and a low interest rate.

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What kind of assets can be used as security?

Whether you’re looking to purchase one of the following items or already own one, you might be able to use it as security for a loan:

  • Vehicles. This includes new and used cars, refinancing existing auto loans, motorcycles, boats, RVs and even jet skis.
  • Property. If you own a property outright or hold equity in a mortgaged property, you can use it as security for a loan.
  • Term deposits. If you hold a term deposit account with a lender, they may be willing to use the amount as a guarantee for a loan.
  • High-cost assets. Some lenders will accept high-cost jewelry, fine art, antiques and other items as security for loans.

List of 25+ types of collateral accepted by lenders

What type of loan is better for you?

If you’re unsure if an unsecured or a secured personal loan is better for you, here are some considerations to keep in mind:

  • If you’re buying a vehicle. The age, cost and type of vehicle will have an impact on whether you can or should get a secured personal loan, or whether an unsecured loan will be a better option for you. Some lenders will only accept newer vehicles as a guarantee, while other lenders may require the vehicle to pass an inspection check.
  • If you want to use the loan amount for various purposes. Lenders offering secured loans tend to place restrictions on the use of the loan amount. For instance, if you’re taking out a secured car loan but also want to buy some furniture, the lender may not let you borrow more than the cost of the car.
  • If you aren’t looking to purchase an asset. You will need to already own the asset you want to use as security. While this is a less common form of secured personal loan, it is an option offered by some lenders.

How you can compare secured and unsecured personal loans

While both types of loans are a viable way for you to finance a new purchase, you can find the option that better suits your needs by comparing them to one another. Here are some factors to consider:

  • Maximum loan amounts. Secured personal loans have less risk involved since you’re providing collateral, so you can normally borrow higher loan amounts than with an unsecured personal loan.
  • Interest rates. Since secured personal loans are less risky for lenders, they tend to come with lower interest rates. You can find fixed and variable rates for both secured and unsecured loans.
  • Fees. You won’t find a great difference in fees between the two loan types. Some fees can be avoided, while you may be able to negotiate others.
  • Credit requirements. Typically, lenders of secured loans are more lenient when it comes to credit requirements than those of unsecured loans.
  • Flexibility of repayments. The difference lies in whether the loan is fixed or variable. If you apply for a fixed-rate loan, you are more likely to find penalties for extra repayments and repaying your loan early. Variable rate loans are less likely to have these penalties.
  • Loan terms. For both secured and unsecured loans, you will generally find terms of between one and seven years.
  • How you can use the funds. If you apply for an unsecured loan, you can generally use the funds for whatever purpose you want. Secured loans tend to come with more restrictions. For instance, if you’re taking out the loan to pay for a car, the lender may require you to use the entire loan amount to pay for the cost of the vehicle.

Credit reporting for secured and unsecured personal loans

For both secured and unsecured personal loans, lenders will likely report your payment history to the two major credit bureaus: Equifax and TransUnion.

  • Any late payments or defaults will be listed on your credit report for up to seven years from the date of the original missed payment.
  • If the collateral you had tied to a secured loan goes into foreclosure or is repossessed, you may get even more negative marks added to your credit report.

What to consider before you apply

  • Will you be able to afford the repayments? If you’re opting for a secured personal loan, the lender will be able to seize your collateral if you can’t afford the repayments. If you’re considering an unsecured personal loan, keep in mind the interest rate is likely to be higher, so your repayments will be more costly each month.
  • How much flexibility do you want with your loan amount? If you want to use your loan to make a large purchase as well as buy a number of other items, check whether this is allowed by your secured loan lender. If you can’t find a secured loan that allows for this, you may need to apply for an unsecured personal loan.
  • Do you want a fixed- or variable-rate loan? Depending on the type of loan you want to take out, you may find more fixed- or more variable-rate loan options. For instance, if you’re considering a secured car loan, you may find more fixed-rate loans than variable-rate loans. It’s important to compare all available options before you apply.

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