Secured or unsecured? That's the question

Is the open road road calling? Or perhaps the high seas? If the idea of a new car or boat gets your motor going, but you don’t have the financial flexibility to score a new ride, a secured or unsecured personal loan might be able to help.

What's in this guide?


Passwords. Your front door. Your job. These are all things you definitely want to keep secured. But what about loans? While your personal deets, your home and your role in the office are going to be sweet no matter which you choose, the unsecured vs. secured loan question is one that has puzzled many an applicant's brain.

Q1: What is a secured loan and what is an unsecured loan?

A secured loan is when you offer your assets as a backup plan in case you can't pay your loan. The loan is "secured" against that asset. If you aren't able to repay your loan, the lender can sell that asset to recoup what you owe.

An unsecured loan is when you don't have to put up an asset as a form of security against your loan.

Pretty simple, right?

Q2: What's the difference?

Outside of having to put something up as security or not, here are some of the differences between secured and unsecured loans.

  • Unsecured loans sometimes come with more scrutiny on applicants, as there's no backup plan for lenders getting their money back without going to court.

  • Unsecured loans can also come with higher interest rates to protect lenders against the risk of not being repaid.

  • Secured loans might give you access to higher amounts of credit, as the lender may feel comfortable offering more knowing there's an asset behind the loan.

Q3: What can I use as security for my secured loan?

Okay, your footy card and Beanie Baby collections are pretty... um, impressive? Though they may be super valuable to you, they're not going to cut it when it comes to securing a loan

However, here are some things you can use as collateral when applying for a secured loan:

  • Your home or other property

    As you can imagine, this can get quite scary. But this is often only done when you're actually buying a house. The lender can seize control of the house if you're unable to pay back your loan.

  • The vehicle you're buying or other vehicles you already own

    Similar to the house option, secured car loans are quite common business. You get the cash for the car, but if you can't pay it back, the car races down memory lane.

  • Your business and its associated equipment

    This is generally only for use when you're trying to get a business loan. Don't own a business? Don't worry about this.

Q4: What happens if I default on my secured personal loan?

If you default on your loan then, per your agreement, the lender technically has the right to take possession of the collateral against which the loan was secured. They can then sell this asset to help get back what you owe.

While there are a lot of benefits of secured loans – including potentially easier access to credit and lower interest – they also come with the potential danger of losing a valuable asset. If you can’t afford to lose whatever you put up as collateral, you need to think twice about a secured loan. Then think about it a third time just to be sure.

But keep in mind that once your loan is paid off, the asset is 100% yours.

Q5: What type of car loan do I go for?

Choosing between an unsecured or a secured car loan depends on a few different things. Here are some questions you could ask yourself as you're trying to figure it out:

  • What's your credit story? If we had a cheeky peek at your credit score, would you get high marks for paying off your credit cards, utilities and other bills and forms of credit on time? If you're a goodie-two-shoes on the bill paying front, get amongst the lower rates of a secured loan.

  • How much do you need? If you don't need a huge loan, you might be OK taking the unsecured route. There's a good chance you'll be paying off your loan over a shorter period, which means you won't get hit with as much compound interest.

  • How bad do you need that car? If you're taking out a car loan because you desperately need a way to get to work or school, you might want to think twice about a secured loan. If you fall too far behind, your lender can snap up those keys faster than you change the station when Post Malone comes on the radio, leaving you stuck.

There's no wrong answer

Like toppings on your pizza, there's no wrong answer when it comes to secured or unsecured loans the opposite is true for pizza: pineapple is always wrong. The best option for you depends on your personal situation. You can learn more about Wisr car loans here.

Did you find this content helpful?

Disclaimer: This article contains general information only, and is not general advice or personal advice. Wisr Services does not recommend any product or service discussed in this article. You must get your own financial, taxation, or legal advice, and understand any risks before considering whether a product or service discussed in this article may be appropriate for you. We have taken reasonable efforts to ensure that the information is accurate at the time of publishing, but the information is subject to change. We may not update the article to reflect any change.

Joanne is a respected leader of multiple disciplines within Banking, with 17+ years’ experience ranging from credit risk, product management, pricing, analytics and strategic project delivery.

Joanne, Chief Operating Officer

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