Personal Loan - Secured or Unsecured

By: Prerna Joneja

Everybody in this world needs money to fulfill their necessary needs in life, but not everyone has sufficient money to do so. So, loans are provided to people for such critical circumstances which may occur suddenly, at any time.

Personal loans can be needed at the time of emergency when a person wants to purchase a home, a car, or at the time to educate his child.

So when you decide to take a personal loan, People usually have two choices - a secured personal loan or an unsecured loan.

An unsecured loan has no form of security. So because of this reason the rate of interest will be probably higher and if people have poor credit rating it will become difficult for them to pay it.

An unsecured personal loan has vast customers because of its no security bond. Tenants, students, self-employed and even home owners take this loan. The absence of security makes the entire application process very smooth and fast.
The terms and conditions in an unsecured personal loan are quite strict. They do not allow and accept late payments. If any payment is missed there are negative effects on the borrower's credit scores.

A secured personal loan on the other hand takes a comparatively longer time in getting the loan sanctioned, still a number of people avail this type of loan. This is because a loan on secured credit promises , flexible repayment terms and most importantly a choice from different interest plans. A secured personal loan can be taken by people by securing any asset. The asset can be anything like their house, car, etc.

A secured personal loan may be easier to obtain and is a more common choice.

  • The lender will check the borrower's income is it sufficient. They don't really want to reclaim any asset of the borrower; they want to get their money back.


  • If a person wants a secured personal loan, he has to provide the lender with security in case he is unable to repay the loan.


  • A secured personal loan is easier to qualify for. If people have a poor credit rating, the lender won't be so worried if the loan is secured against your house.


  • A secured is less risky for the lender, so interest rates are lower.


Lenders have been able to reduce the interest rates associated with this loan type because of the presence of security. For Financial providers and banks, secured personal loan is a beneficial lending option. Lenders can recover their investments if there is a failure in repayment. The commission for brokers is also greater in this loan type. The growing competition among the lenders ensures that at least the borrowers of personal loans are having a wider array of schemes and options to choose from.

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