There are at least three things you should know about an unsecured personal loan:

  • Unlike secured loans, unsecured personal loans do not require collateral, such as a car or laptop.
  • They tend to be more available as loan options to people with stronger credit.
  • The terms may be less favorable, but the lender won’t be legally able to seize your property if you don’t pay back the loan.
A wheel diagram that looks like a football diagram. It has the words "loans"  in the center with many arrows pointing toward it. The points all have different types of loans.


If you’re just starting your loan shopping, you’ll soon realize that there are two major personal loan paths you can take: secured and unsecured.

Understanding the difference may help increase your chances of getting approved and get terms that are better for you.

Unsecured vs. Secured Loans: Which is Better?

Which loan you should get usually depends on your level of credit, distance to a physical lending branch, and your desired loan terms, among other factors.

But most people who opt to NOT get an unsecured loan do so because interest rates are typically higher, and they can be harder to qualify for.  

This is because collateral security makes lenders feel better about giving you money. Backing up your borrowing with collateral reduces the lenders’ risk which often equates to better loan terms for you.

Is a Personal Loan Secured or Unsecured?

Either one! In many cases, you have the option to choose whether your personal loan will be secured or unsecured.

However, if you’re looking for a loan online, note that not all types of secured loans will be available unless you can visit a physical branch. For instance, if you’re shopping for an auto-secured loan that uses your car or truck as collateral, the lender will often want to physically see the vehicle first. That means your secured personal loan options may be limited to lenders with branches that are close to you, depending on what kind of collateral you choose.

How to Qualify for an Unsecured Personal Loan

There’s no single qualification process, and every lender is different.

But many lenders will let you pre-qualify, so you can see if you might qualify without it affecting your credit score.

After that, you’ll likely have some forms to fill out and the lender will likely check your credit. If you’re approved, your funds should be on their way.

Unsecured Personal Loans: Collateral-Free Borrowing

If you’re seeking a personal loan but aren’t thrilled about involving your car or other personal items, then an unsecured personal loan may be a good option.

The trade-offs, however, could be a less favorable interest rate and a decreased probability of qualifying.

Whatever you chose, it’s important to ask lots of questions before making a decision. Don’t be shy!

Compare rates on your personal loan; check out our loan calculator to find your monthly rates!>>>

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