Difference between Secured Loan vs Unsecured Personal Loan

A secured loan is a type of loan that is given by a bank or NBFC against an asset that is used as security or collateral. By providing loans, lenders are at a potential risk of the loan not being repaid. To counter this, banks ask for an asset of similar value like land, gold etc., as collateral. The asset will be under the ownership of the lender until the loan is paid off.Examples of a secured loan:

1. Car loan
2. Home loan
3. Loan against property

Unsecured loans are those loans that are given out by lenders without any collateral or security. Unsecured loans are riskier for lenders, and hence they do not give out such loans easily. Financial institutes only approve of unsecured loans after careful evaluation and verification of your repayment capability. The interest rate is also higher for unsecured loans for this reason.

Is a personal loan secured or unsecured?

A personal loan is mostly an unsecured loan, as banks approve the loan without asking for any security or collateral.Other examples of unsecured loans:

1. Credit cards
2. Student loans

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.