Secured vs Unsecured Loans
The one question that matters most: what can the lender take if you can't pay?
Every kind of borrowing falls on one side of this line or the other. Knowing which side your loan sits on tells you a lot about its price, how big it can be, how long it takes to arrange – and what you could lose.
Side By Side
Secured
Backed by something you own, usually your home or car, which the lender can claim if repayments stop.
- Examples
- Mortgages, second-charge loans, car finance
- Amounts
- Often large, sometimes hundreds of thousands
- Price
- Usually lower rates, as the lender's risk is smaller
- Speed
- Slower – valuations and legal checks take time
- At risk
- The asset itself
Unsecured
Based on your promise to repay, your income and your credit history, with nothing signed over to the lender.
- Examples
- Personal loans, credit cards, overdrafts
- Amounts
- Smaller, from a hundred pounds upwards
- Price
- Usually higher rates, as the lender carries more risk
- Speed
- Fast – often decided online in minutes
- At risk
- Your credit file, and court action if the debt goes unpaid
Think Carefully Before Securing Debt
A lower rate on a secured loan can look tempting, especially for clearing other debts. But moving a credit card or a personal loan onto your home turns an unsecured debt into one that your home depends on. If your circumstances change and you can't keep up, the consequences are far more serious.
Unsecured debts are not risk-free either. Missed payments are recorded on your credit file for six years, and a lender can take you to court for what you owe. In England, Wales and Northern Ireland, a county court judgment can in some cases lead to a charge being placed on your home. If you are worried about any debt, free advice from StepChange or National Debtline is the right first step.
Homeowner? It Doesn't Mean Secured
Some unsecured lenders only lend to people who own their home. That is a lending rule, not security: owning a home suggests a settled address and a longer credit history, which these lenders look for. Nothing is signed over, and your property is not at risk because of the loan. A few lenders on the Quick Loans panel work this way, and every loan arranged through our loans pages is unsecured.
Secured And Unsecured Questions
Is a guarantor loan secured?
No. Nothing is signed over, but a second person agrees to repay if you can't. Our guaranteed loans guide explains why these are now very hard to find in the UK.
Is car finance secured?
In effect, yes. With hire purchase and PCP the finance company owns the car until you have paid, so it can take the car back. Our car finance guide explains the protections you have.
Why are unsecured loans more expensive?
If a borrower stops paying, the lender has nothing to sell to get its money back, so it charges more to cover the loans that are never repaid.