Secured Loans

Are Secured Loans Better Than Unsecured Loans?

Secured Loans

What are secured loans?

Just like most things in life, you get what you give. These loans require the borrower (you) to pledge property, which includes an asset of some sort, as collateral. Secured loans are usually given in much larger amounts, and with less interest, because of the security provided by the collateral (assets). However, if you are unable to repay the loan on time, you will risk losing you asset, as the lender has the right to sell it or keep it.

Are secured loans better than unsecured loans?

Well, unsecured loans serve as the complete opposite of secured loans. In this scenario the lender takes more risk than the borrower. These loans are given without any pledges of repayment which increases the interest rate and decreases the amount borrowed. Unsecured loans include things like credit card payments, education loans or personal loans.

Secured loans are borrowed in larger amounts with the risk depending on the borrower. There are a few factors that go into deciding which is better for you. Unsecured loans are usually easier to get if you have no credit history or are maybe trying to build up your credit history. On the other hand, unsecured loans makes it easier to obtain assets which you might not yet have.

What types of secured loans are there?

Secured loans are offered in different types including:

  • Auto loans (new or used)
    • An automobile purchased as collateral to repay the lender.
  • Mortgage loan
    • The loan is secured by the property you are purchasing with the money you are borrowing. It can either be on a fixed interest rate or floating interest rate. However, the lender actually holds the title of the building/home until the loan is fully paid.
  • Construction loan
    • This financing option has two parts: a loan to cover the construction and a mortgage on the finished building. The plus side of this particular secured loan is that you only need to apply for one and you will only have one loan closing.

Tips for taking out a secured loans

Is it the right fit?

We all have different needs, and as consumers with different needs, we take out loans for various reasons.  Make sure you shop around to be as sure as possible that the choice on which lender you choose or which plan you choose is the right choice.  


When it comes to loans, the fineprint should not be treated like the terms and conditions box we tick to make the process move on quicker. Not reading the fineprint can very often lead to unnecessary fees. The lender is looking for a steady stream of interest, so there could be administration, prepayment or penalty fees. Make sure the terms of the repayment works for you.

In other words, ask for the full disclosure before signing anything.

Don’t take on more that you can afford

Before you take on any loan agreement you should be able to look yourself in the mirror and know that this will be repayable - comfortably. Taking on a loan is not a comfortable thing to do, but you do to want to find yourself in too deep.

Some lenders will look to ply you with more than you can handle, which means that before you decide to apply make sure you have done a proper financial check on yourself with an advisor. Set your mind on an amount, and stick to it !