Is a personal loan secured or unsecured?
Most personal loans are unsecured, meaning no collateral is required. You do not need to put up a car, home, or other asset to borrow.
Glossary
Unsecured Loan
A loan that does not require collateral. Approval is based on the borrower's creditworthiness, income, and other factors rather than a pledged asset.
In depth
Understanding Unsecured Loan
Personal loans are typically unsecured. Because there is no collateral to seize if a borrower defaults, lenders take on more risk and may charge higher interest rates compared to secured loans. However, unsecured loans protect borrowers from losing property like a home or vehicle. They are available to homeowners and renters alike.
FAQs
Common questions
What happens if I cannot repay an unsecured loan?
Since there is no collateral, the lender cannot immediately seize property. However, missed payments will damage your credit score, may result in collection activity, and could lead to a lawsuit. Contact your lender early if you anticipate trouble repaying.
Related terms
See also
Secured Loan
A loan backed by collateral — an asset the lender can claim if the borrower defaults. Mortgages and auto loans are common examples.
Read more →Personal Loan
An unsecured installment loan that can be used for almost any purpose. Repaid in fixed monthly payments over a set term.
Read more →Credit Score
A three-digit number (typically 300–850) that summarizes a borrower's credit history and predicts the likelihood of repaying debt. Higher scores indicate lower risk to lenders.
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