Personal loans generally fall into two categories: secured and unsecured. Each comes with different risks, costs, and requirements.

What Is a Secured Loan?

Secured loans require collateral, such as a car or savings account, which the lender can claim if you default.

What Is an Unsecured Loan?

Unsecured loans do not require collateral and are approved based on creditworthiness and income.

Key Differences

  • Collateral requirement
  • Interest rates
  • Approval criteria
  • Risk level for borrowers

Pros and Cons

Secured loans may offer lower rates but carry the risk of losing your asset, while unsecured loans offer convenience but may have higher rates.

Bottom Line

The right choice depends on your financial situation and risk tolerance.