Taking control / October 22nd 2020

Secured Vs Unsecured Loans

A person holding up puzzle pieces with the words “personal loan” on them.

You may have seen the words ‘secured’ and ‘unsecured’ when shopping for a loan, but what do they mean? Learn the main differences between secured and unsecured loans below!

What is a secured loan?

A secured loan is one that is connected to a piece of collateral; something valuable like a car or a home. With a secured loan, the lender can take possession of the collateral if you don't repay the loan as you have agreed. An unsecured loan is not protected by any collateral. This difference affects your interest rate, borrowing limit, and repayment terms.

Advantages of secured loans

A secured loan is normally easier to get, as there's less risk to the lender. If you have poor credit history, lenders will be more likely to consider you for a secured loan. Additionally, a secured loan will tend to have lower interest rates because the lender is taking on less financial risk. That means a secured loan, if you can qualify for one, is usually a smarter money management decision.

You can borrow larger amounts with a secured loan, because lenders are confident that they will get their money back, either from loan repayments or sale of the collateral.

What does an unsecured loan mean?

An unsecured loan is a loan that’s issued and supported only by the borrower's creditworthiness, rather than by any type of collateral. Unsecured loans, are approved without the use of property or other assets as collateral. Typically, this form of finance is offered in a smaller amount than a secured loan, but is charged at a higher interest rate in order to cover the lack of collateral. This is sometimes a more appealing option to borrowers, as you aren’t committing something that you already own to cover repayment of the debt.

How can you establish which might be better for you?

There are a few factors that go into deciding on a secured versus an unsecured loan. At the end of the day, which loan is best for you depends on your current financial situation, as well as numerous other factors such as which assets you can use as security (in the case of a secured lending), whether you have good or bad credit, as well as your credit score. Each of these factors should be taken into account before you make your decision, as they’ll all influence your application, the amount you can borrow, as well as the interest rate you’ll pay.

Getting a loan from MoneyShop

Ready to get a loan? If you decide to go for a secured loan, we lend on cars, furniture and property. There must be no money owing on your security. If a balance remains, we can sometimes pay this out and build the cost into your personal loan. However, if you don’t have security for the loan, it may be that your situation allows us to lend you an unsecured loan up to the value of $1500. Otherwise, you can arrange a Guarantor. The Guarantor follows the same procedure as if they were borrowing the money and must have suitable security.

Want helpful tips delivered directly to your email? Subscribe to our mailing list today!

Looks good!
Please enter your First Name
Looks good!
Please enter your Email
Looks good!
Please enter your Phone Number

Related Posts

millenial-p2p-funding

Lifestyle

Why are Millennials Interested in P2P Lending?

Today’s generation of young people need to think very differently about their financial futures than in the past, and we’re finding a trend where a lot of millennials are flocking to non-traditional investment options like peer-to-peer lending. We explore the basics of P2P lending and its benefits below!

Read more

January 22nd, 2021

Man typing on laptop

Taking Control

Are Digital Loans the Way of the Future?

Applying for a loan has never been easier. Numerous lending companies offer online personal loans that provide fast funding and other modern conveniences that a typical brick-and-mortar bank can’t. But the question remains—are digital loans truly better than face-to-face applications with a lender at a bank? Let’s discuss the benefits of online personal loans and what sets them apart from traditional lenders. To learn more, read on.

Read more

Feburary 22nd, 2021

Buying your first car

Lifestyle

Buying Your First Car? Learn How to Get a Car Loan Here

Buying a car is a pricey decision, that requires research, planning, and most importantly, financing. If you’re planning to buy your first car, we recommend learning what your financing options are first. Will you pay upfront? Do you apply for a car loan with your dealership? Or will you borrow money online? We know decision-making can be stressful, but it doesn’t have to be with the help of a trusted car loan. Read on to learn how you can get a car loan so you finally hit the road with confidence.

Read more

March 22nd, 2021