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What’s The Difference Between A Secured And Unsecured Loan?

What is an unsecured loan?

An unsecured loan is not protected by collateral, like a car or a house. It can allow you to borrow money for various reasons, like debt consolidation or for a wedding. An applicant’s overall credit profile, rather than collateral, plays a role when applying for an unsecured loan. Common types of unsecured debt include:

Before you get a loan, there are many points to consider if you’re looking to pay down debt with an unsecured loan. Here are a few important advantages to an unsecured personal loan:

Some of the disadvantages include:

Discover Personal Loans understands that paying off credit cards and consolidating other high-interest debt is a sensitive subject, which is why we’ve made the process of applying for a personal loan as streamlined as possible, with flexible terms and a quick turnaround time for decisions and funding if your application is approved – no collateral required.

What is a secured loan?

While an unsecured loan does not require collateral for application, you may be wondering what do I need to apply for a secured loan?

A secured loan is a loan that requires you to offer an asset as collateral, often times equal to the amount you’re requesting. The most common assets people use are their homes and cars, but a wide range of other valuables can be used, including cash. The secured loans you’re most likely familiar with include3 :

Secured loans allow borrowers to request larger amounts of money, sometimes equivalent to the value of their collateral, at a reduced risk to the lender. For example if you use your car as collateral for a secured loan and it’s valued at $15,000, you may be able to request up to that amount. Like anything, secured loans have their advantages and disadvantages.

Some advantages to secured loans include:

While the advantages sound pretty good, secured loans may not paint as rosy a picture. Some of the disadvantages include:

Secured VS. Unsecured Loans: Which Is Right for You?

The question of secured vs. unsecured loans really comes down to what you need and how much risk you’re willing to assume to accomplish your financial goals. If your goal includes consolidating or paying down higher interest debt, an unsecured personal loan may be the option that’s best for you. An unsecured loan, like a Discover Personal Loan, has many advantages – fixed rates, flexible terms and fast decisions and funding up to $35,000. On the other hand you could get more money with a secured loan, but you, as a borrower, assume the risk of forfeiture of your collateral.

Becoming more financially secure is a journey we all take at one time or another. When you’re equipped with the information to make the best decisions possible, the road to paying down debt is a little less windy. Discover Personal Loans works with each customer to align them with an unsecured personal loan based on their needs. Discover makes recommendations tailored to you, so when you apply for a personal loan online, you can be confident in your journey.