What are the key differences between secured and unsecured loans?

The choice between an unsecured and secured loan impacts your approval chances, your rates and fees and the need for collateral.

Collateral

The primary difference between secured and unsecured loans comes down to collateral. With a secured loan, you give the lender the right to seize the asset you use as collateral should you fail to repay the loan. With an unsecured loan, no assets are required — though you’ll still face credit implications if you default on your loan payments.

Interest rates

Lenders take on less risk with secured loans since the borrower has more incentive to repay the loan. Because of this, interest rates are typically much lower. However, with a good credit score you will get more favorable rates for either type of loan. A good credit score is typically considered anything 670 or higher.