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Secured Loan vs. Unsecured Loan: What’s the Difference?

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Secured Loan vs. Unsecured Loan: 
What’s the Difference?

If you’ve done any research on loans, or ever seen a commercial, then chances are you’ve heard the terms “secured loan” and “unsecured loan.” Yet, it often seems as if the people talking to you about these assume you know what they are.

What happens if you’re just learning and don’t know what they are? If you need an unsecured personal loan, you might be left with questions. Which do you need? Which can you get? Most importantly, what is each, and how are they different?

What is a Secured Loan?

A secured loan is backed by collateral. In other words, when you get the loan, you put something valuable on the line in case you can pay it back - for example, a car or home loan. With a secured loan, the lender can take possession of the collateral if you fail to make a payment on the loan and can’t finish paying it back.

What is an Unsecured Loan?

On the other hand, you have a loan that’s not backed by collateral - an unsecured loan. What this means is that the lender can’t automatically take your valuables when you can’t pay back the loan - otherwise known as defaulting on the loan. These types of loans are credit cards, student loans, and personal loans.
unsecured-loan

Which is Right for You?

As you can see, the only difference in these loans is how they are backed/if they are backed. However, this difference is a major one. Secured loans are easier to get and often have lower credit score requirements as the lender knows they’ll get something out of the deal. In addition, a secured loan will often have a lower interest rate and a higher lending limit.

Time: The Biggest Factor

While it might sound great to have a loan with a low-interest rate and high limit, it’s not everything. Getting a secured loan takes time, and having something that you can give of value. If you have just one (or neither of those), then an unsecured loan is the way to go. While many require a higher credit score, loans like payday loans give you a way to get payday advance, at home, and with almost any credit score.
secured-loan

What is iCASH?

iCASH is an online payday lender that offers cash advances for people in need of quick money. We offer unsecured loans to people with a wide range of good and bad credit scores and needs. If you’re looking for money to pay for an emergency - take a look at iCASH today.

Ramona Glanville

Ramona has been a regular contributor to some of Canada's top wealth-management editorials for over 30 years. She strongly believes in good saving habits, reducing financial clutter, and red wine.