Tesco Bank states that the primary difference between a secured loan and an unsecured loan is that a secured loan is backed by collateral while an unsecured loan is not. Secured loans provide a greater level of protection to the lender, since the collateral becomes the property of the lender if the borrower defaults.Know More
According to Tesco Bank, the additional protection offered by a secured loan is frequently reflected by higher borrowing limits and lower interest rates. Although unsecured loans are not backed by collateral, lenders do not blindly loan money. A person's credit score, employment history and income play a role in determining at what rate and how much money that person is permitted to borrow.
WiseBread lists auto loans, mortgages and home equity lines of credit as secured loans. If the borrower defaults on these types of loans, the lender can legally seize the property used as collateral. Examples include repossessing a car or foreclosing on a house. The most common types of unsecured loans are personal lines of credit, student loans and credit cards. Since there is no collateral with unsecured loans, lenders must use a different set of techniques to collect on defaulted debts.
Financial Web reports that negative marks on a person's credit report are the first consequence of default. A creditor may pursue collection through mail or phone calls or via a court judgement that allows it to freeze bank accounts or garnish wages.Learn more about Credit & Lending
Individuals seeking a personal bank loan must decide whether to apply for an unsecured or secured loan, know their credit score, and be able to repay the loan, according to Bankrate. People can shop around among different financial lenders and find the best terms before applying for the loan.Full Answer >
Hard money, in terms of loans, is a loan that uses collateral or an asset in order to secure the amount borrowed. This option is used when an individual cannot qualify for a traditional loan due to poor credit or low income.Full Answer >
Unsecured debt is a loan with no collateral, which means the interest rate is usually higher than that of secured debt, which is backed by an asset. Some examples of unsecured debt include credit card debt, student loans and medical bills.Full Answer >
Unsecured credit cards provide credit lines that are not secured by collateral, states CreditCards.com. Issuers approve individuals for unsecured credit cards based on credit history, earnings potential and financial security. Unsecured credit cards are known as the most popular type of credit cards.Full Answer >