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what's the difference between secured and unsecured loans?

Jessica

Hi Jonathan,

Welcome to MortgageFit forum.

A secured loan is a loan that requires an asset as security for the loan. If a borrower fails to pay off the loan, the lender may seize the collateral and sell it to repay the loan.

But an unsecured loan is not secured against any asset and are offered after considering the borrower's creditworthiness. These loans offer higher risk compared to secured loans. Therefore the interest rates in unsecured loans are also higher.

For example, If Jack takes a loan from Jenny by keeping his house as a security for the loan, then such a loan is said to be secured. But if the loan is not backed by the house as collateral, then it becomes unsecured.

For further reference, go through
http://www.mortgagefit.com/secured-loan.html and http://www.mortgagefit.com/unsecured-loan.html

Waiting to receive any further queries.

Regards,
Jessica

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