Loans
Secured vs Unsecured Loans
What collateral means, how it changes the rate, and what you risk if you can’t pay.
What is the difference?
A secured loan is backed by an asset the lender can claim if you don’t pay; an unsecured loan is not.
If you stop paying an unsecured loan, the lender can still take you to court, send the debt to collections, and report the missed payments to the credit bureaus.
Put it into practiceCompare personal loansHow much lower is a secured rate?
Often several percentage points. Fairstone, for example, publishes 19.99%–25.99% for secured loans versus 29.99%–34.99% for unsecured loans.
| Lender | Loan | Rate | Amount |
|---|---|---|---|
| Fairstone | Unsecured personal loan | Interest 29.99% – 34.99% | $500 – $25,000 |
| Fairstone | Secured personal loan (homeowners) | Interest 19.99% – 25.99% | $5,000 – $50,000 |
| LendDirect | Line of credit | APR 34.99% | Up to $10,000 |
| LendDirect | Vehicle-secured loan | APR 24.99% – 34.99% | Up to $25,000 |
Secured loans can also come with extra costs such as appraisal, title, lien or legal fees, so compare the APR.
When does a secured loan make sense?
When the lower rate saves real money and you are confident you can make every payment.
Never secure a loan with something you can’t afford to lose, such as the car you need to get to work, if your income is uncertain.
Keep reading
LoansPersonal Loan vs Line of CreditHow the two differ in rates, payments and flexibility, and which one suits a one-off cost or ongoing spending.
LoansHow Personal Loans Work in CanadaWhat a personal loan is, how lenders set your rate, what it costs and what you need to apply, explained step by step.
LoansDebt Consolidation Loans in CanadaHow combining debts into one loan works, when it saves money, and the traps that can leave you deeper in debt.- LoansLoans with Bad Credit in CanadaWho lends to people with poor or no credit, what it costs, and safer ways to borrow or rebuild.
Official sources and further reading
Terms vary by product. Confirm the provider’s current terms before acting. This guide does not predict approval, realized value or credit-score changes. How WalletReturn calculates value