Secured or unsecured? That's the question

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.

A secured loan is when you offer your asset(s) 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?

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.

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:

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.

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.

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.