Secured vs. Unsecured Loan
A secured loan is backed by something you own, such as a house or a car, which the lender can claim if the loan is not repaid. An unsecured loan is backed only by your agreement to repay, so approval rests more heavily on credit history and income.
The collateral is the difference, and it changes the terms on both sides. Secured borrowing usually carries lower rates and allows larger amounts, because an asset the lender can recover reduces its risk. Unsecured borrowing costs more for the same reason.
Mortgages, auto loans and home equity products are secured. Most personal loans and credit cards are unsecured.
The tradeoff is not only price. A missed payment on an unsecured loan damages credit; a missed payment on a secured loan puts the asset itself at risk.