Secured loans always require collateral to approve a credit application, while unsecured loans do not.

Unsecured loans would be considered personal loans or consolidation loans and usually come with a much higher interest rate because there is nothing provided as collateral to secure the loan.

Secured loans are considered the optimum loans for lenders to approve since they are backed by collateral and will often be viewed a less risk.  Clients who provide collateral to their loans, often have more of a vested interest in repaying the loan since they do not want their asset to be seized and sold if they do not make their payments.  Secured loans often have a much lower interest rate offer than unsecured loans.

Examples of secured loans would be:

Mortgage – home is collateral
Secured Line of Credit – property is collateral (includes HELOC – home equity line of credit)
Car loan – vehicle is collateral (includes motorhomes, boats, ATVs, etc)
Invest Margin Account Loan – investment assets/portfolio is collateral
Prepaid Credit Card – cash deposit provided up front as deposit

Examples of unsecured loans would be:

Credit card cash advances
Personal loans
Unsecured lines of credit
Student loans
Bank overdrafts on accounts
Payday loans
Installment payments on insurance, utilities, subscriptions or memberships

Christine’s Tip:

If you have excellent credit with good, stable income, you will have no problem getting a secured or unsecured loan from any of the big financial institutions.  These lenders want good clients on their books and compete with one another to offer the lowest rate.  They will often pay you to switch your business, such as appraisal fees, discharge fees, title charges and cashbacks to help you pay for penalties with a competing lender.  Pout on your poker face and haggle with these lenders.  You might be surprised at all the offers they make to get your business.