A secured loan is connected to a piece of collateral – something valuable like a car or a home. With a secured loan, if you don’t repay the loan as you have agreed that collateral can be automatically taken or repossessed by your lender. A car loan and mortgage are the most common types of secured loan.
An unsecured loan is not protected by any collateral. If you default on the loan, the lender can’t automatically take your property. The most common types of unsecured loan are credit cards, student loans, and personal loans.