If you ask a loan provider, he will define the loan provided for you as secured or unsecured loan. A secured loan charges very low interest rate unlike an unsecured one. What makes the difference between the two? Which is more beneficial? Read on.

  • What are secured and unsecured personal loans?
  • Points to remember before opting for a secured personal loan
  • What are the benefits of a secured loan?

The sum of money that an adult individual would borrow to fulfill his financial requirements is called a personal loan. A personal loan can be used for almost any purpose – in fact, they could help meet most of the borrower’s financial emergencies. Personal loans are much preferred on account of their flexibility. There are two types of personal loans, secured and unsecured.

One of the most defining distinctions between different types of loans is the lender’s Requirement of Security. Security is the collateral offered by the borrower to the bank/lender, to secure the loan he has applied for. If the loan is not repaid in timely fashion, the lender could seize the collateral to sell it for repayment of the loan. Top quality collateral not only reduces the lender’s risk, but comes with a lower rate of interest on the loan. Borrowers with a history of poor credit would find it impossible to receive funding for a loan without offering high quality collateral as security.

What is a Secured Personal Loan?

A secured personal loan is called so due to the security or the collateral that is involved in the whole process of lending. It is

  • A loan that requires the consumer to provide the lender with some form of collateral or security – i.e. his property or his home, either mortgaged or owned – other than just his verbal assurance of repaying the loan.
  • In other words, it is a loan that has been secured on the borrower’s assets.

Points to Remember Before Opting for a Secured Personal Loan

  • If the borrower agrees to a secured personal loan using his home as collateral, he should be prepared for the eventuality of forfeiting it to the lender, should he not make his loan payments and interest on time and according to the agreed terms.
  • The lender would sell the property to recover his money and cover any additional expenses incurred while doing so.
  • Before he signs up for even a small secured personal loans, the borrower has to make sure that he can afford the monthly payments. It would be in his best interest therefore to read the credit agreement terms carefully, paying special attention to the interest rate and term of the loan, the total amount that is payable, and the repayments required.

Benefits of a Secured Loan

The benefits of secured personal loans are various, the primary being:

  • That they can be repaid with lower monthly payment, over a longer period of time.
  • That the rate of interest charged on the loan would be much lower than a comparable instant unsecured personal loans, thereby making the option of a secured personal loan cost-effective. One does not have to worry about unmanageable loan repayments terms, on account of the low interest rates. Later the personal loan could also be offering a more flexible repayment period.
  • That, if the borrower is the owner of a home, the chances of a lower rate of interest being charged on the loan are high, since he has secured the loan based on the strength of his assets. Failure to repay the loan would mean foreclosure or repossession of this asset by the lender, thereby greatly reducing the lender’s risk. Hence, the low interest rates. On secured loans, the typical APR is 6-25%.
  • Secured loans are more easily available at very reasonable rates, to those with adverse credit rating, i.e., with a tarnished history of defaults, arrears, and bankruptcy, and to those with a poor credit record, for example, people who are self-employed or those who have just changed jobs.
  • The borrower is allowed funding that ranges from 3,000 dollars (if you want a small secured personal loan) up to 50,000 dollars, and some lenders are willing to contemplate lending more. This is much more funding than an instant unsecured personal loan would allow, and where the maximum amount that one could borrow would be for a limit up to 25,000 dollars. Secured personal loans are the loans for you, should you require a large amount that could be repaid over a longer term.
  • The borrower could consolidate his more expensive borrowings into a single monthly repayment that is much cheaper. He could opt for a secured loan in order to consolidate debt, and to replace the high interest rate loan with a much lower one.
  • The easy availability of the secured personal loan is another benefit for consumers. Because of the low risk that funding a secured loan poses to its lenders, very few applications for a personal secured loan are turned down.
  • Another benefit would involve the flexibility of a secured personal loan. This type of loan could be used to meet the needs of any financial requirement, be it debt consolidation or home improvement, whatever.
  • Only when the borrower has adequately provided for its amortization, can the benefits of the secured personal loan be enjoyed. Therefore, it would be smart to make preparations for the loan repayments from the very beginning, and to choose the mode of loan repayment that most suits you.
  • Secured Personal Loans are now available in the USA, with a wide pool of lenders, especially online, so that one could browse and book the best personal secured loan on the Internet, choosing the best terms of interest rates and other conditions.


Covering most topics technology related, with a focus on small business, startups, and entrepreneurs in particular. PurelyThemes started out as a WordPress theme development initiative, but has since been focusing on publishing quality content for the past few years.