Secured vs. Unsecured Loan
✓ Last verified 14 Sep 2026
The short version
A secured loan is backed by collateral the lender can claim on default; an unsecured loan has no such backing, which is why it typically carries a higher interest rate to compensate the lender for the extra risk.
See our full article on secured vs. unsecured default consequences for the complete picture - in short, collateral (a home, vehicle, or fixed deposit) backing a secured loan gives the lender a fallback recovery option, which is reflected in a typically lower interest rate. An unsecured loan (most personal loans, credit cards) carries no such backing, so lenders price in the extra risk through a higher rate - the interest-rate gap between the two loan types is essentially the price of that collateral protection.
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