Secured vs. unsecured loans: Compare the differences |
Secured vs unsecured personal loans

Compare secured vs. unsecured loans

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What’s the difference between a secured and unsecured loan?

A personal loan can help you take your next step if you need extra cash. Whether you want to buy a car or have home renovations to take care of, you’re likely to find a number of different lenders and loans to choose from.

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 in the guide below.

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 has to sue you in order to get back the money that’s owed.

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Rates last updated October 24th, 2018

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Name Product Product Description Min. Credit Score Max. Loan Amount APR
Credible Personal Loans
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Good to excellent credit
4.99%–36% (fixed)
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Affordable loans with two simple repayment terms and no prepayment penalties.
6.99% to 35.97% (fixed)
Monevo Personal Loans
Quickly compare multiple online lenders with competitive rates depending on your credit score.
3.09%–35.99% (fixed)
Marcus by Goldman Sachs Personal Loans
Consolidate your debt or pay off large expenses with competitive rates and no fees.
Good to excellent credit
6.99% to 24.99% (fixed)
Even Financial Personal Loans
Get connected to competitive loan offers instantly from top online consumer lenders.
4.99%–35.99% (fixed)
LendingClub Personal Loan
A peer-to-peer lender offering fair rates based on your credit score.
6.16% to 35.89% (fixed)
Conveniently check your loan options without affecting your credit score.
9.95%–35.99% (fixed)
SoFi Personal Loan Fixed Rate (with Autopay)
No fees. Multiple member perks such as community events and career coaching.
6.99% to 14.87% (fixed)
OneMain Financial Personal and Auto Loans
An established online and in-store lender with quick turnaround times. Poor credit is OK.
16.05%–35.99%* (fixed)
NetCredit Personal Loan
Check eligibility in minutes and get a personalized quote without affecting your credit score.
34%–155% (Varies by state) (fixed)
CashUSA Installment Loans
A connection service for quick cash loans up to $10,000.
Bad credit OK
5.99%–35.99% (fixed)

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What kind of assets can be used as security?

Lenders are willing to use all kind of assets that hold value as guarantees for loans. Whether you are 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 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 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 what type of personal loan you should be applying for, here are some considerations to keep in mind:

  • If you’re buying a vehicle. The age, cost and type of vehicle will have a bearing 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 new vehicles (generally less than two years old) as a guarantee. If you want to purchase an older car using a secured car loan, it may need to pass a vehicle inspection check and still need to be under a certain age, usually seven years.
  • 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 are 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 main points of comparison:

  • Maximum loan amounts. Since secured personal loans have less risk involved, you can normally find higher loan amounts offered than with a standard unsecured personal loan.
  • Interest rates. As 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. Expect establishment fees for both types of loans, although you can find lenders that don’t charge any fees to set up the loan. Some loans come with monthly fees, but these are not standard, so make sure to compare so you know your loan is competitive.
  • 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. Compare lenders to find the most competitive option.
  • Loan terms. For both secured and unsecured loans, you will generally find terms of between one and five years for fixed-rate loans and one and seven years for variable-rate loans.
  • 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 report your payment history to the three major credit bureaus: Equifax, Experian and TransUnion. Any late payments or defaults will be listed on your credit report for 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 repossess your asset if you can’t afford the repayments. If you are considering an unsecured personal loan, keep in mind the interest rate is likely to be higher and so your ongoing repayments will be more costly.
  • 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.

Frequently asked questions

Adrienne Fuller

Adrienne Fuller leads the publishing team at She has one goal: to deliver the accurate and transparent information she wishes she had when she made some of life's important financial decisions. When she's not helping folks save money, she's hiking with her two Catahoulas around her home in San Diego.

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2 Responses

  1. Default Gravatar
    ManysFebruary 24, 2018

    We have a Venezuelan Restaurant and it is operating with our own capital. We need to get working capital for the company.
    As collateral we can offer the assets that exist (approximately $ 20,000). We are foreigners and we are in the process of asylum here in the United States.
    For this month of April-18 we must have Social Number, and work permit in the United States.
    With the above described, we can apply for a loan for working capital ??

    • finder Customer Care
      AshMarch 18, 2018Staff

      Hi Manys,

      Thank you for visiting finder.

      Kindly look into this page for the Business Equity Loans that you may apply to. You may compare their requirements as well as the minimum & maximum loan amount to know which will suit your needs.

      There are different types of equity loan that you may take advantage of, such as Property Type, Loan to value of equity, Interest Rate and Loan amount & terms.

      I hope this helps.

      Let us know if there is anything else that we may assist you with. Enjoy the rest of your day!


US Personal Loans Offers

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Even Financial Personal Loans

Get connected to competitive loan offers instantly from top online consumer lenders.

Prosper Personal Loans

Borrow only what you need for debt consolidation, home improvements and more — with APRs based on overall creditworthiness.

LendingClub Personal Loan

A peer-to-peer lender offering fair rates based on your credit score.

SoFi Personal Loan Fixed Rate (with Autopay)

No fees. Multiple member perks such as community events and career coaching.

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