This guest post is written by our partners at Fairstone.
If you’re researching loans, you may ask yourself, “what’s the difference between a secured and unsecured loan?” We’ve broken down the differences between the loan types to help you decide which is right for you.
What does it mean to secure your loan?
When you secure your loan, you’re essentially backing your agreement to pay the loan back with an asset. Every lending company has different requirements to secure a loan, but most prefer to secure loans against a house or vehicle. Mortgages are the most common type of secured loans when you’re securing the loan against the house you’re purchasing.
Secured loans may give you access to more money at a lower rate, because the lender has a stronger guarantee that you’ll make regular payments. On the other hand, they may involve more paperwork and a longer processing time, as the lender might need to have your asset assessed to ensure they understand its value.
How are unsecured loans different from secured loans?
Unsecured personal loans are backed by a contract (not an asset). Unsecured personal loans don’t require you to have any type of asset to back the loan, meaning you don’t have to be a homeowner to qualify.
Another difference with unsecured loans is the time it takes to get approved. The application process for an unsecured loan is usually quicker since the lender doesn’t have to do a valuation of your assets. This allows you to access your money faster.
Check your free credit score with Borrowell! Then, visit your personalized Recommendations Page to see the best unsecured loan products for you.
Why do people choose to secure their loan?
If you have the option to secure your loan, there are several benefits of doing so:
- You may gain access to lower interest rates
- Longer loan terms may be available for secured loan products
- Secured loans may allow you to borrow a larger amount of money, giving you the ability to take on larger projects such as home renovations
Is a secured loan right for me? How do I know if I qualify?
If you’re a homeowner, a secured loan may be the right option for you. If you’re looking for a secured personal loan, you may be interested in our loan products at Fairstone.ca. You can request a free no-obligation loan quote to see how much money you could qualify for.
With so many types of loans out there, you have the option of choosing the best one for your situation. Remember, when deciding to secure your loan, consider things like your living situation (whether you rent or own a home), and how fast you need access to your money – this will help you choose the loan that’s right for you.
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