Unsecured Loans vs Secured Loans: Which is Right for You?

Daniel Joelson

Daniel Joelson

Total Posts: 508

Published Date: December 9, 2021

Daniel Joelson has been in the consumer finance space since 1994, he has helped to develop underwriting manuals for the financial sector. With a vast amount of Knowledge in consumer finance, he has been writing articles for all types of loans. With his knowledge, he is able to help many people to answer different financial problems.

Unsecured Loans vs Secured Loans… If you need to borrow money, you may have to decide whether to pursue an unsecured loan vs a secured loan. Depending on your situation, both have their advantages and disadvantages. When possible, it’s best to opt for a secured loan.

While secured loans generally provide better repayment terms, they may not always be an option for some borrowers. When that is the case, borrowers can turn to unsecured loans as an alternative.

The most common types of unsecured loans are 1. Credit cards, 2. Personal loans, 3. Student loans, and 4. Home improvement loans.

The most common types of secured loans are 1. A mortgage 2. Home equity lines of credit, 3. Auto loans, both new and used, 4. Title loans, 5. Boat loans, and 6. Recreational vehicle loans.

Let’s look at the various types of unsecured loans vs secured loans and how the two differ from each other in general.

Types of Unsecured Loans

In recent years, a growing number of consumers have been taking out unsecured loans. Unsecured loans are popular among those who are facing a large expense soon but have little savings to rely on. These loans do not have to be borrowed against an asset like a car or house, and they can often be obtained by people with bad credit or no credit. Here are some common types of unsecured loans.

Credit Cards

credit card loans
Credit card loans

One of the most familiar types of unsecured loans is a credit card. Credit cards provide direct access to lending capital with required monthly payments. Some credit cards come with an annual fee while others do not. Terms and conditions vary from provider to provider. The amount that can be borrowed on a card is referred to as its “credit limit.”

Credit cards can be used in shops or online. They can also be used as a cash advance, meaning you take cash out of an ATM. Any charges made on a credit card will accrue interest if the balance is not paid in full at the end of each month. As of February 2018, the average interest on a credit card is 16.82%.

One benefit of using a credit card is that it builds credit. As long as you make timely payments every month and don’t sustain high balances for long periods, your credit score will generally improve.

Personal Loans

Personal loans

A personal loan usually provides for a greater amount of debt than a credit card could offer, but less than a larger loan like a home equity loan.

Personal loans are considered somewhat of a “last resort” option. In other words, if you have the option of going for any other kind of loan, you should probably do it. Of course, if you’re looking into unsecured loans, you may not have the required capital to get a secured loan. But you can still get a credit card with a high credit limit and low interest if you have good credit. Unsecured Loans vs Secured Loans.

Many personal loans start at $5,000 and come with interest rates in the 10% – 15% range. Note that this is a lower rate of interest than that of the average credit card. And like a credit card, a personal loan counts as an additional line of credit on your credit report, meaning it makes your credit score higher if you pay it off on time.

Student Loans

Student loans

Student loans are just what they sound like – loans made for students. The most common type of student loan is an undergraduate loan, which is used for earning an undergraduate degree such as an Associate’s or Bachelors’s. While they are usually used to cover tuition expenses, student loans can be taken out for any education-related expenses like books or computers.

Student loans cannot be discharged in bankruptcy without an “undue hardship” exception. Such an exception is only granted under rare circumstances. For most people, student loans will be a life-long burden, making this type of loan a prime example of the potential pitfalls of unsecured loans.

Home Improvement Loans

Home improvement loan
Home improvement loan

Homeowners have to maintain the quality of their home for it to remain valuable. If a home doesn’t receive regular upgrades for its basic functionality as well as interior and exterior design, it could decline in appraised price, reducing the homeowner’s equity in the property. For this reason, homeowners sometimes choose unsecured home improvement loans.

A home improvement loan can often be acquired with

or no credit and is used to make upgrades to a home such as building a pool, remodeling a driveway, or putting up a new roof.

Types of Secured Loans

Unsecured loans can be beneficial if you have poor credit or need cash right away. But in most cases, secured loans offer a better means by which to take on debt. Mortgages and auto loans are the quintessential secured loans that most everyone has heard of. Here are a few of the most common types of secured loans.


Home mortgage loan

Homes are expensive. Very few people have the savings to purchase a new home with cash. As a result, the most common way of purchasing a home is to get a home loan or mortgage. The typical mortgage will be paid back over 30 years.

As long as you can prove you have enough regular income to make timely payments and have well-established credit, you should be able to get a reasonable mortgage relative to your annual earnings.

Mortgages offer the property they are used to purchasing as collateral. If you default on your debt obligations, your home will be foreclosed upon and the bank that issued the loan will repossess your house.

The average rate of interest on a 30-year fixed mortgage is 4.52%.

Home Equity Lines of Credit

Home equity line of credit
Home equity line of credit

A loan made for a pre-determined amount that is secured by your home is referred to as a home equity loan. This kind of loan can be paid back over time with fixed monthly payments similar to a mortgage. If a home equity loan is not paid off as per its original agreement, your home could be put into foreclosure by the lender.

A home equity line of credit (HELOC) also uses your home as collateral. However, a HELOC functions more like a credit card with a revolving line of credit. You can borrow as you need instead of taking a fixed amount all at once. It can also come with certain tax advantages that other kinds of loans do not offer.

HELOCs sometimes come with a catch – a lump sum due at a later date. Loans that come with what’s known as “balloon payments”, or large lump sums due at the end of the loan, can cause a borrower to go into even more debt to pay off the loan.
The average rate of interest on a home equity loan is 5.66%. Auto equity loans work similarly …

Auto Loans

Auto loans

Similar to mortgages, auto loans provide a means by which people without the savings required to purchase a car or other vehicle outright can buy one slowly over time. Car dealerships let you finance your vehicle through their preferred lenders. But there is a better option.

Getting pre-approved for a loan lets you establish financing terms directly with the lender beforehand. Not only does this allow you to avoid sales gimmicks that can trick you into paying more for a car than you ought to, but salespeople will sometimes offer you a better deal in an attempt to secure a new loan themselves! To find out how a title loan works please read on!

To get pre-approved for an auto loan with a bank, credit union, or online lender, you only need a few standard pieces of information. These will include proof of your income, assets, employment, and identity. The process can take as little as twenty minutes.

The average rate of interest on an auto loan for a new car is 4.55%.

Title Loans

Title loans
Title loans

A title loan is a kind of collateralize loan that offers up a title of ownership as an asset to borrow against. The most common kind of title loan is a car title loan. A car title loan involves you agreeing to give up your car in case you can’t pay back the loan. The amount you can borrow will be in direct proportion to how much your car is worth. You can apply for a car title loan online today.

Unsecured Loans vs Secured Loans – Why You Should Choose the Former

Now you know the difference between unsecured loans and secured loans. When you consider an unsecured loan vs a secured loan, keep in mind that a secured loan will almost always be a better bet in the long term. However, when a secured loan is not an option, you may have to opt for an unsecured loan. All things considered, secured title loans for everyone provide more certainty and will serve borrowers better when deciding between unsecured loans vs secured loans.

This article was brought to you by TFC Title Loans, we try to bring to you the most informative information. If you are interested in getting an auto title loan near to you, we are able to help you with our large referral network.

We will help you to get the most money by using the equity that you have in your vehicle, the application is fast and we can provide you with same-day funding.

All of our referral partners are in compliance with the CFPB. We will help you to get the money that you need but from a trusted and reliable title lender.


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DISCLAIMER: As our policy to make sure you know what we do and what are our limitations, we offer you these disclaimers. We are NOT A LENDER and we do not make short term cash loans or credit decisions. We are a referral service and work only with licensed lenders/brokers.

We may act as the broker for the loan and may not be the direct lender. Loan proceeds are intended primarily for personal, family and household purposes. We do not offer or service student loans.

*Loan amounts by the lenders vary based on your vehicle and your ability to repay the loan.

*Since we do not lend money directly we cannot offer you a solicitation for a loan, except in the state of California. In all other serviced states we WILL match you with a lender based on the information you provide on this website. We will not charge you for this service and our service is not available in all states. States that are serviced by this Web Site may change from time to time and without notice. Personal Unsecured Loans and Auto Title Loans are not available in all states and all areas.

*Auto Title Loan companies typically do not have pre-payment penalties, but we cannot guarantee that every lender meets this standard. Small Business Loans typically do have pre-payment penalties and occasionally will use your car as collateral to secure the loan.

*All lenders are responsible for their own interest rates and payment terms. TFC Title Loans has no control over these rates or payments. Use of the work competitive or reasonable does not mean affordable and borrowers should use their own discretion when working directly with the lender.

*The amount of people who applied for a loan and we helped and those who received a loan is not the same. We cannot guarantee we will find a lender who will fund you.Just because you give us information on this web site, in no way do we guarantee you will be approved for a car title loan or any other type of loan. Not all lenders can provide loan amounts you may see on this web site because loan amounts are limited by state law and/or the lender. Some lenders may require you to use a GPS locator device on your car, active all the time. They may or may not pay for this or charge you for this. This is up to the lender and we have no control over this policy of the lender. Typically larger loans or higher risk loans use a GPS.

*In some circumstances faxing may be required. Use of your cell phone to receive updates is optional.

*Car Title Loans are expensive and you may have other ways to get funding that is less expensive. These types of loans are meant to provide you with short term financing to solve immediate cash needs and should not be considered a long term solution. Residents of some states may not be eligible for a loan. Rejections for loans are not disclosed to our firm and you may want to contact the lender directly.

*Car Title Loan lenders are usually licensed by the State in which you reside. You should consult directly with these regulatory agencies to make sure your lender is licensed and in compliance. These agencies are there to protect you and we advise making sure any lender you receive money from is fully licensed.

*Trading Financial Credit, LLC dba TFC Title Loans, Car Title Loans California, Dineromax. If you are using a screen reader and are having problems using this website, please give us a call at 1-844-242-3543 for immediate assistance.

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