Is a personal loan secured or unsecured

What is Personal Loan?

A personal loan is a amount of money you can borrow to meet your immediate financial requirements from an approved loan provider. For home renovation and repairs, wedding, vacation or to cover emergency hospitalization costs, you can also take a personal loan.

A personal loan is an unsecured loan, meaning you don’t make a promise to get the loan. This is also regarded as a non-collateral loan.

Besides unsecured loans like personal loans, long-term consumer loans or credit card usage, we also need to understand secured loans. Below are the distinctions between safe and unsecured loans.

Secured against unsecured loans

How much have you looked for financial opportunities to renovate your home or higher education for your children abroad or for a family marriage? There was a lot of research into banks, interest rates, tenors etc. Despite being so involved in the process, have you ever backtracked and tested whether you were going to make a secured or unsecured loan? The response is most definitely a no. Most people don’t know what’s right for them. They are both fairly desirable and have their own benefits and disadvantages. You can choose what works best for you, depending on your financial situation.

The secured loan is a loan supported by an asset (e.g. a car or property), which you are also aware of as an asset loan in order to reduce the risk taken on by the bank. When you do not make the requisite refunds, the asset is taken over by the bank.

A Secured loan could be

A car loan to buy a car you’ve always wanted.

A home loan for the purchase of a flat or building. You can take it to renovate your house as well.

Secured corporate loan where machinery, equipment , raw materials, construction, etc. are committed against the amount of loan required.

The unsecured loan is made on the basis of your income and costs and requires no collateral. It offers the flexibility to select a reimbursement term for one to five years and usually provides the best loan rates for borrowers seeking repayments between three to five years.

An unsecured loan could be

A personal loan for a holiday abroad, wedding with the family, a business requirement or any other requirement for which liquidity is not ready. This loan can be purchased at a higher interest rate with a comparatively smaller tenor.

The most flexible form of short-term debt with easy reimbursement options.

A credit overdraft you can use to make use of the bank’s unsecured lending.

Difference from secured loan to unsecured loan


Secured loans are low-risk activities for lenders, because they can collect unpaid duties from the asset or collateral if there are loan defaults. This is the key reason why such kinds of loans are known as secured loans.

On the other hand, although the borrower bears low risk on unsecured loans, this means a higher risk to borrowers if it turns out to be a bad loan.


In general, the use of the loan money is restricted to the nature and purpose of the loan for a secured loan. For instance: a home credit may only be used to purchase a house; a car loan to buy a car. In case of gold and property loans, however, one can use the loan money for any purpose.

There are no restrictions on how you use the money in case of a personal loan. You can spend the money on refurbishments, furnishings, shopping, holidays or any other emergency.

Loan amount and Vintage of loans

When we choose between secured loans against unsecured loans to satisfy our financing needs, we also have to take into account the loan value. You can access a higher sum of loan with secured loans when you pledge an asset as collateral against the loan. You can also take the loan for a longer term with secured loans.

An unsecured loan like a personal loan is available up to 5 years, while secured loans like a home loan can last for a period of 20-25 years.

Score for credit

When you apply for an unsecured loan, your CIBIL score, income, repayment history and other factors will play an important role. But in the case of guaranteed loans, lenders don’t give a lot of weighting to the credit value, income and other factors.

Rate of interest

By general, interest rates for secured loans are lower than those for uninsured loans. Lenders charge lower interest rates on secured loans because a collateral is committed to take advantage of the loan.

Having learned the difference between secured and unsecured loans, you are the best person to decide what form of loan fits your requirements best. If it is an unregulated or secured loan, you will obtain approval with smart lenders within minutes and payment within 24 hours.

An instant personal loan does not only help you meet your immediate financial requirements, but also lets you develop and improve your credit and background. The best time to benefit from a personal loan is with competitive interest rates and flexible repayment options.


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