Getting a personal loan can help cover any financial gaps you may need assistance with, but how do you know which type of personal loan is right for you? Do you look at getting a secured loan or unsecured loan. Both types are personal loans but do have similarities and differences.

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What is a Secured Loan?

A secured loan is a type of personal loan, that generally requires collateral. Common collateral used for secured loans can include the following: houses, vehicles, recreational vehicles, Funds from a share certificate (CD), etc.

A secured loan can be a good option for those with unestablished credit or a lower credit score. This type of loan is a great option for those that may not qualify for a signature loan.

What is an Unsecured Loan?

Often called a signature loan, an unsecured loan is a type of personal loan that does not require collateral. Since this type of loan does not require collateral, it is a good idea to have good, established credit when applying for this loan.  This type of loan generally considers your repayment history and credit score as a qualifying factor.

What is the Difference Between a Secured Loan vs. an Unsecured Loan?

Secured loans and unsecured loans are both great lending options to help with your financial needs. However, they do have some important similarities and differences that are important to understand in order to determine your lending needs:

Similarities:

  • Both types of loans can be used to fund almost anything
  • Both loans may help improve credit

Differences:

  • Signature loans often do not require collateral while secured loans do require it.
  • Obtaining an unsecured loan is generally quicker than a secured loan due to the lack of collateral needed for unsecured loans
  • Since secured loans require collateral, interest rates generally tend to be lower compared to unsecured loans where interest rates may tend to be higher
  • Secured loans generally can get approved at a higher dollar amount due to having collateral. However, unsecured loans typically are not approved for higher dollar limits due to the lack of collateral.

What Can You Do with a Personal Loan?

  • Consolidating debt
  • Emergency expenses
  • Paying medical bills
  • Purchasing recreational vehicles and equipment (Boats, ATVs, RVs, Snowmobiles)
  • Vehicle expenses and repairs that warranties may not cover 
  • Unexpected home repairs
  • Wedding costs
  • Education expenses
  • Better alternative to payday loans

Where Can I Get a Personal Loan?

Many credit unions and banks offer personal loans. Before applying for any kind of loan, always take the time to research which type of loan is right for your needs. Credit Union 1 offers signature loans and share secured loans as well. Consider applying for a personal loan over the phone, applying online, or by visiting a branch.