what are Secured and Unsecured Loans and difference between them


All of us at any point in life will have the need to buy something which cannot be fulfilled by our income. Thus bank and lenders come into the pictures which provide us the loan with an interest rate. There is a time duration in which you have to pay the loan back to the lender and if you fail, the bank has the right to sell your property to get its money back. Let us dig into the key differences between different kinds of loans. Now here comes the two kinds of loans and its condition are different from each other.

There are two types of loans:-

  1. Secured Loans
  2. Unsecured Loans


Secured loans are those loans which will be given to you by making you keeping your property under their name. For example, if you take a loan for making a house, then the lender will keep your pieces of jewellery and other property under his surveillance so that if you fail to pay back the loan with interest, the bank can have its money by selling your property. And even if there is some margin by which the loan is still not fulfilled, then you will have to pay it yourself. There is no limit when it comes to borrowing a loan as the lender is always secured about the money. Some examples of secured loans are vehicle loans. The lender will have some of your property worth some money and in return, it provides you with the loan. The lender will take your asset so that in future it can work as collateral for them. Thus in simple words, they, are backup loans with you providing your asset.


Unsecured loans are contrasting in each and every aspect as compared to the secured loans. They do not have a clause regarding keeping anybody property under its name. Generally, a person with good credit and high income will be tied to unsecured loans, for example, a student credit card is an unsecured loan. As there is no system of keeping any property under collateral, the lender is always unsecured regarding the loan; this makes the amount to be borrowed very less as compared to secured loans. The rate of interest differs in both kinds of loan. Thus it becomes very important to pay off your loan in given duration without straining your income or daily needs.

What is the reason behind people opting for secured loans although unsecured loans do not seize your property?

The answer is very simple, although unsecured loans do not have a collateral thing still it requires someone who is strong enough to clear his credit on time. This lessens the chance of 70% of the population to apply for an unsecured loan. But one thing should be always kept in mind is that no matter what kind of loan you are taking, make sure you are capable to pay off the amount otherwise the interest rate can almost bring you on roads because of negligence.