Guide to Understanding Collateral Loans: Unsecured vs Secured Loans


Wondering what’s the difference between secured and unsecured loans?

You must be!

Well, they both differ mainly on one condition – an item used as collateral or security.

How do Secured Loans Differ from Unsecured Loans?

Secured loans are secured by an asset known as collateral, whereas unsecured personal loans are lent by keeping in view the borrower’s creditworthiness.

So, if you’re confused which type of loan would be best for you, read on to get an understanding of collateral loans and how you can get them.

What are Secured Loans?

As the name suggest, getting a secured loan requires you to give an item as security to the lender. This item, or collateral , must be something highly valuable, and could be seized if the debtor is unable to repay his loan on the due date.

Wondering what could be used as collateral when getting a secured loan?

Well, usually, collaterals are assets such as personal vehicles, paychecks, home equity, cash or savings accounts, paper investments, precious metals, etc. Collateral loans like these are commonly used to borrow large sums of money.

Also, in the case of such loans, you’d have to pay a lower interest rate as compared to unsecured loans.


Simply because secured loans are less risky for the lender. However, these loans are quite chancy for the borrower, because your home could be repossessed if you don’t keep up the payments.

Nevertheless, if you believe that repaying your loan in time won’t be much of an issue, just visit a collateral loans pawn shop to get a pawn loan effortlessly.

Can’t locate the best pawn loan shop?

Just search on Google for “ pawn loans near me ” or “ pawnbrokers near me ” to find the perfect place!

Now, let’s move on to the other “flavor” of loans.

What are Unsecured Loans?

These are the kind of loans that aren’t secured or backed up by any precious asset.

Unsecured loans are extended to the borrower on the basis factors such as your credit rating , which would be damaged in case of your inability to repay.

Which is why, they are riskier for the lender, hence the higher interest rate. You might be thinking what happens if the loan isn’t paid back?

To answer that, you might incur additional charges in case the payment is delayed from your side. Also, the lender might decide going to court in order to get their money back.

Hope this article would’ve helped you in better deciding which type of loan would be best for you. However, in the light of the facts stated above, I recommend you go for a secured loan from a well-reputed pawn shop in your locality.

And guess what more you can get while you’re at a pawnbroker’s?

A pre-used luxurious Rolex watch! But before you actually get one, make sure you know some basic tips to buying a Rolex watch .