Secured & Unsecured Loans

A secured loan is a loan that is backed up by an asset. The most obvious example is a mortgage on a property, which is backed up by the value of the property itself. Put simply, if you get a secured home loan from a lender and you default on the repayments, the lender can repossess your property and sell it, then use that money to pay back your loan. The same thing can happen with a car loan or any other secured loan that covers a personal asset.

Unsecured loans aren’t tied to your assets, so even if you fail to make your repayments, the bank isn’t entitled to seize your asset(s) to pay back your loan. For this reason, unsecured loans are offered at a higher interest rate. Applicants often need to have a good credit rating and lenders aren’t as willing to lend a lot of money when the loan is unsecured.

​​​​​​​This information is intended to be general in nature only and might not apply to your personal circumstances. When in doubt always seek professional guidance.