Secured Loan vs. Unsecured Loan

Two common types of loans are secured loans and unsecured loans. The difference between secured and unsecured loans lies in collateral. Secured loans require collateral as financial assets, a home or a vehicle. Unsecured loans don’t require collateral to apply. As a result, unsecured loans are riskier for the lender and may come with higher interest rates.

Use this comparison chart to understand secured vs. unsecured loans and which types of loans are in each category:

Secured Loans

Unsecured Loans

Car title loan

Payday loan

Mortgage loan

Installment loan

Home equity line of credit

Student loan


Personal line of credit


What Is a Secured Loan?

Secured loans are backed by collateral, such as a house, car, or piece of jewelry. Common types of secured loans are mortgage loans and car title loans. With a secured loan, the lender holds an interest the title or deed until the loan is fully repaid. If the borrower cannot repay the secured loan, the lender can take possession of the collateral and sell it to pay off the loan.

Pros and Cons of Secured Loans

Secured loans may come with higher borrowing limits, lower interest rates, and longer repayment terms than unsecured loans. Still, secured loans may come with greater risk because if the loan isn’t repaid on time, you can lose your collateral.

When You Should Consider a Secured Loan

You might consider a secured loan if you need to borrow a large amount of money over a long period of time. You might also consider a secured loan if you have assets, such as a car or house, that you can offer as collateral.

What Is an Unsecured Loan?

Unsecured loans are not backed by collateral. Common types of unsecured loans are payday loans, installment loans, and personal lines of credit. If the borrower cannot repay the unsecured loan, the lender can’t take the borrower’s assets, but they can transfer the account to collections to help set up payment arrangements. In extreme cases, the lender can choose to take legal action.

Pros and Cons of Unsecured Loans

Unsecured loans may be less risky for the borrower. More risk for the lender, however, can result in lower borrowing limits, higher interest rates, and higher credit scores needed to apply.

When You Should Consider an Unsecured Loan

You might consider an unsecured loan if you need to borrow a smaller amount of money quickly. You might also consider an unsecured loan if you don’t have collateral, such as a car or house, to offer as collateral.

Secured and Unsecured Loans from Advance America

Advance America provides both secured and unsecured loans. Here are our loan products:

Advance America Secured Loans

Advance America offers the following secured loan:

Car Title Loan

Car title loans provide quick access to cash based on the value of your vehicle and ability to repay. No bank account or great credit score is required to apply.

Advance America Unsecured Loans

Advance America offers the following unsecured loans:

Payday Loan

Payday loans help you put a little extra money in your pocket before your next paycheck arrives. Payday loans are short-term, small-dollar loans that are usually paid back within a month.

Installment Loan

Installment loans are personal loans that can be paid back in small amounts over time, often from between 3 and 24 months. Payments can be automatically withdrawn from your bank account or delivered in cash at an Advance America location.

Lines of Credit

Personal lines of credit provide quick and convenient access to money in case of an emergency. Once you’re approved for a line of credit and certain credit limit, the line stays open for you to withdraw from as needed. You only pay interest on the money you withdraw, and you can pay it back all at once or over time.

The Advance America Advantage

Since 1997, Advance America has helped millions of hardworking Americans with a variety of financial solutions including Payday Loans, Online Loans, Installment Loans, Title Loans and Personal Lines of Credit.

134+ million
loans issued
1,400+ stores
and online loans
23+ years
providing loans
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