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Are Personal Loans Secured Or Unsecured?

When it comes time to check out your loan options for financing a purchase, paying off medical bills, or paying down debt, things can become confusing pretty quickly. Unfamiliar terms and definitions associated with personal loans can make it difficult for people to understand what personal loans are and how they work. Since there are so many types of loans available, you're probably wondering, "is a personal loan secured or unsecured?"

Well, the answer is – it depends!

The primary difference between secured and unsecured personal loans is the presence of collateral. A secured loan requires that you use one of your assets as collateral to “secure” the loan, promising the lender that they can take that asset if you fail to repay the loan in full.

You don’t actually have to give the asset to the lender to get your loan, you just have to promise that they can take it in the event that you default. You can use all sorts of assets as collateral, including things like your car, your home, a vehicle, a piece of property, or some other valuable item or set of items.

Unsecured loans, on the other hand, do not require any form of collateral, meaning you don’t have to promise anything to secure the loan.

We'll get into all of the details of secured vs unsecured personal loans in this article. If you still have some questions about personal loans, give us a call at 866.287.6225 today for a free no-obligation consultation with our financial experts.

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Secured vs. Unsecured Personal Loans

As we briefly mentioned above, a personal loan can be secured or unsecured, depending on the lender's terms and the needs of the borrower. Because a secured loan is secured with collateral, you must have something of value if you're seeking this type of loan. Keep reading for everything you need to know about secured and unsecured loans.

Secured Personal Loans

First, to clarify what are personal loans, this is when an individual borrows money from a lender for an unspecified reason. In other words, it's not for a specific item; it can be used to make a variety of different purchases.

So, what is a secured personal loan? This loan differs from a standard unsecured loan. It requires an item or savings account to stand as collateral in the event that you are no longer able to pay the monthly installments. Here's what you need to know about secured personal loans.


Qualifying for a secured loan is often much simpler than qualifying for an unsecured loan. While all loans require financial statements and credit checks, you're more likely to be approved if you also put up a car, your home, or a savings account as collateral. This extra security helps lenders see that you're a reliable borrower.


Because you are risking a bit more if you can no longer pay your loan off, secured loans actually feature lower interest rates than an unsecured loan. The rate you're offered will generally depend on what type of collateral you offer up; a higher-value item will help you get lower rates.


Secured personal loans follow the standard repayment of loans in fixed monthly installments over a term decided upon by the borrower and lender. Of course, depending on the secured loan, you might also see variable rates that change over time.


There are always risks associated with taking out a loan under any condition, and the same applies to secured personal loans. If you're no longer able to make payments on the loan, not only will your credit suffer, but you'll also lose the collateral. Make sure that you're able to keep up with payments for the duration and that you can afford to lose the collateral if it comes down to it.

Unsecured Personal Loans

So, what is an unsecured personal loan?

In essence, an unsecured personal loan is taken out by an individual on the promise that they will pay it back within the term set by the lender. No collateral is required, so there's less of a risk for the borrower – though that is not to say no risks are involved at all. We'll get to that in a moment. Here's what you need to know about unsecured personal loans.


As with a secured loan, qualifying for an unsecured personal loan requires financial statements and a credit check, so you'll need to gather the appropriate documents detailing your income, assets, and debts. The higher your credit score, the more likely you are to qualify for an unsecured loan. If you're not sure you'll get the best rates with your current credit score, check out our tips for how to improve your credit score.


The range of rates for a typical unsecured loan varies dramatically, anywhere from 5% to 36%. The rate you are offered will largely depend on your credit score, so ensure that yours is on the higher end to get the best rates.

Need some quick help? Consider the CU SoCal Credit Builder Loan, a loan designed to Members boost their credit score without too much hassle.


An unsecured personal loan is usually paid back in fixed monthly payments. Typical terms are usually between two and seven years, depending on the amount, rate, and desired monthly payments.


There are fewer risks associated with unsecured loans than with secured loans. You don't run the risk of losing your collateral if you can't pay. Instead, the only risk you run if you can't pay is that your credit score will go down. Additionally, some lenders provide assistance in the form of deferring monthly payments if you can't pay.

Where To Get A Personal Loan

Whether you're looking for a secured or unsecured personal loan, you have a few options for where to get one. While you look at your different options, pay close attention to the interest rates, terms, and fees that may apply. Below we've detailed some of the primary lenders you might choose from.


Since most people have a bank account, banks are one of the first stops in the search for a personal loan. It's convenient to apply for a loan at the same place you bank with, and you may already be familiar with their processes and rates.

However, keep in mind that traditional banks will usually have higher requirements for income and credit scores. If your credit isn't great, you might find it difficult to get approved at a bank. They also often charge higher application fees than other lenders.

Credit Union

Unlike banks, credit unions are not-for-profit organizations, so they're able to reinvest any profits into the organization and pass the resulting savings onto its Members.

You'll see much lower interest rates and low – or no – fees on personal loans with credit unions. Credit unions can also provide more personalized service to its Members, which makes applying for a personal loan easier and less stressful.  

CU SoCal stands out among credit unions because, along with our great Member service, we also provide easy-to-use online banking services through our website and mobile app, so you can track your finances and loan payments wherever you have an internet connection.

Online Lender

Online lenders are much newer options compared to credit unions and banks. It's easy to find and compare lenders online since all of their information is on the web. However, you won't get the personalized service that you'll find with other lenders. What's more, they may also have much higher interest rates.                            

Which Type Of Personal Loan Is Best For You?

Choosing between a secured and unsecured personal loan depends largely on what your needs and situation require. As both types have their advantages and disadvantages, you'll need to have a closer look at the rates compared to the risks.

Losing your car or home if you can't make payments on a secured loan could cost you a lot more in the long run. If your credit score is excellent, you might be better off seeking out an unsecured loan from a viable lender, like CU SoCal.

CU SoCal Personal Loans

At CU SoCal, we know that taking out a personal loan can be a daunting process, especially if you're not sure how it all works. We also know how important it is for our Members to get the best rates and terms for their needs, which is why we offer competitive rates and financing up to $30,000. We never charge application fees or prepayment penalties.

Apply For A CU SoCal Personal Loan Today!

Call us today at 866.287.6225 to schedule a no-obligation consultation to learn more about our personal loans and other top-notch financial products.

Get Started on Your Personal Loan!

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Credit Union of Southern California (CU SoCal) is a leading financial institution empowering those who live, work, worship, or attend school in Orange County, Los Angeles County, Riverside County, and San Bernardino County to reach their goals and build strong financial futures. CU SoCal provides access to convenient money management services and offers competitive rates and flexible terms on auto loans, mortgages, and VISA credit cards—turning wishing and waiting into achieving and doing.


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