A secured loan is one in which the money borrowed is guaranteed to be paid off or some asset will be surrendered. The most common example is a home loan. The borrower agrees to repay on the terms of the contract, and if he or she defaults, the lender can legally claim the home as compensation. This usually doesn’t happen but the thought of it scares people into paying off their loans at all costs

An unsecured loan is one that has no security that the lender can seize if you cannot pay the loan back. It is also given at a fixed interest rate that is usually very high. Since there is no security tied to the loan the lender strictly requires that borrowers have good credit, a good income, and financial stability before granting this type of loan. These loans are are used when you need cash for bill consolidation, auto repairs, vacations, emergency cash, taxes, or other personal financial needs.

The bottom line is that both loans have benefits and faults but if you don’t own a house or have bonds or other assets then you will probably be forced to use an unsecured loan.