APR 5.99% – 35.99%·$100 – $50,000

Get Advance Loan
Head to head

Personal Loan vs Secured Loan: Which Is Better for You?.

An unsecured personal loan requires no collateral - your signature and creditworthiness are the only guarantees. A secured loan requires you to pledge an asset (a savings account, certificate of deposit, vehicle equity, or in some cases home equity) as collateral. If you default, the lender seizes the collateral. In exchange for that risk, secured loans typically offer lower interest rates. The right choice depends on your credit, the asset you can pledge, and how much risk you are comfortable with.

Side by side

Unsecured Personal Loan vs Secured Loan

AttributeUnsecured Personal LoanSecured Loan
Collateral requiredNone - unsecuredYes - savings account, CD, vehicle equity, or other asset
Typical APR range8%-36% depending on credit score3%-18% (savings-secured: 2%-5%; auto equity: 8%-18%)
Risk if you defaultCredit damage, collections, potential lawsuit - but no asset lossCredit damage AND loss of pledged collateral (savings, vehicle, etc.)
Common typesOnline personal loans, bank personal loans, credit union personal loansSavings-secured loans, CD-secured loans, share-secured loans, auto equity loans
Loan amounts$1,000-$100,000Up to 90%-100% of the pledged asset value
Approval with bad creditDifficult below 580; rates are high at 580-640Possible even with poor credit - the collateral reduces lender risk
Funding speed1-5 business days1-7 business days (longer if collateral appraisal required)
Credit building potentialYes - on-time payments reported to all three bureausYes - same reporting, and some secured loans are specifically designed for credit building
Verdicts by scenario

Which wins, when.

  1. 01

    You have a 650+ credit score and do not want to risk an asset

    Winner: Unsecured Personal Loan

    At 650+, unsecured personal loan rates are competitive (14%-22% APR at major lenders). The rate savings from a secured loan may be 3%-8 percentage points, which may not be worth the risk of losing savings or a vehicle if you hit a difficult financial period.

  2. 02

    You have poor credit (below 580) and a savings account to pledge

    Winner: Secured Loan

    A savings-secured loan (pledging your own savings as collateral) may be available when no unsecured lender will approve you. Credit unions typically offer these at 2%-5% APR, and they serve double duty: you get funds and build credit history simultaneously. The catch is that you cannot access the pledged savings until the loan is repaid.

  3. 03

    You want to build credit with minimal interest cost

    Winner: Secured Loan

    A share-secured or savings-secured loan at a credit union (rates: 2%-5%) is one of the most cost-effective credit-building tools available. You borrow against your own money, pay minimal interest, and the on-time payment history is reported to all three bureaus. Many credit union CD-secured loans cost less than $100 in total interest on a 12-month credit-building loan.

  4. 04

    You need a large amount (over $25,000) and have vehicle equity

    Winner: Secured Loan

    Unsecured personal loans above $25,000 are available only to borrowers with excellent credit. A vehicle with significant equity can secure a larger loan at lower cost. Auto equity loans from credit unions or some banks may offer 50%-80% of vehicle value with rates 4%-8% lower than unsecured options for comparable credit profiles.

Common questions

Frequently asked.

What can I use as collateral for a secured personal loan?+

Common collateral types: Savings account balance: most credit unions offer share-secured loans (pledging your savings account balance). You cannot withdraw the pledged amount until the loan is repaid. CD (certificate of deposit): many banks offer CD-secured loans. You pledge a CD as collateral and borrow up to 90%-100% of the CD value while the CD continues to earn interest. Vehicle equity: some credit unions and banks offer auto equity loans. Vehicle title: auto title loans exist but typically carry very high APRs (25%-300%) - generally not recommended. Home equity (HELOC): technically a secured loan, but classified differently and not what is typically meant by 'secured personal loan.' Investment accounts (brokerage-secured loans): available at some financial institutions for qualified investors.

Does a secured personal loan hurt my credit if I miss a payment?+

Yes. Secured loans are reported to credit bureaus identically to unsecured loans. A 30-day late payment damages your credit score just as severely. The additional consequence with a secured loan is that the lender can also seize the collateral. With a savings-secured loan, the lender typically freezes and liquidates the savings balance to cover the missed payment or default. With an auto equity loan, the lender may pursue repossession. Missing payments on either loan type is damaging; the secured version adds asset loss risk on top of the credit damage.

Are savings-secured loans always a better deal than unsecured loans for someone with bad credit?+

Not always. With a savings-secured loan at a credit union (typically 2%-5% APR), you borrow against your own savings - which remain frozen during the loan. You could instead simply spend your savings directly without borrowing. The benefit of the loan is the credit-building aspect (on-time payment reporting) and preserving the savings account for another purpose. If credit building is NOT a goal, spending existing savings directly (rather than borrowing against them) is cheaper. Savings-secured loans make most sense when (1) you want to build a credit history, (2) you need the savings reserved for a specific purpose, or (3) your credit is too thin or damaged to qualify for any unsecured product.

Other comparisons

Compare real personal-loan offers.

Begin a request