What is the difference between secured and unsecured loans?

Most financial loans fall under two categories: secured loan or unsecured loans. The main difference between the two is the presence (or absence) of collateral. This is something to be taken as security against non-repayment. In this article we explain the difference in the two and which option might be best for you.

What is a secured loan

A secured loan is a loan where the borrower pledges an asset (in most cases property) as security/collateral for the loan. This means that, if the borrower were to default on his or her payments, the lender could take possession of the asset used as collateral and may sell it to regain some or all the amount originally loaned to the borrower.

Secure loans are normally available for much larger amounts than personal loans and are often the better option for those whose credit rating isn’t great. Repayment periods for secured loans can also be longer, with easy management of repayment plans.

What is an unsecured loan

As you may have been able to tell, unsecured loans are loans where lenders allow you to borrow money without having to offer up any assets, such as property, as collateral. You will need to prove a good credit score and sound financial history. The loan period is usually shorter than a secured loan and the amount of interest charged is dependent on the borrowing period.

Secured and unsecured loans are widely available and offer the flexibility to choose how long you want to repay them. People tend to make repayments over three and five years, meaning you will often pay a higher interest rate to borrow over a shorter term.

Here at Funding Hut, we have a track record of providing customers with unsecured funding within one day! If you’re looking for funding, give us a call today on 0203 900 0970 or email enquiries@fundinghut.co.uk



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