Unsecured Loans Vs Secured Loans (2016 Update)

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Unsecured loans vs Secured loans

Unsecured Loans Vs Secured Loans: Which Is The Best For You?

We all have aspirations and great visions towards economic stability. However, it’s unfortunate that our financial constraints limits our dreams. But taking a loan to finance your idea can be a game changer.

There are many financial institutions in the business of lending money. But before you walk all the way to those institutions aka banks and licensed moneylender, take your time and look through the various types of loans available. The secret on the best type for you is entirely upon you.

Consider your needs and weigh the options available then decide on the loan that suits your needs. Below are the common types of loans in the market.

Secured loans    

These are loans where the borrower pledges some asset as the security of the loan. The most common type of loan in this category is the mortgage loan. In this type of loan the borrower gives the lender a security which remains in the lender’s possession until the mortgage is fully repaid.

In the event of default, the lender has a legal right to sell asset to recover the loan amounts. By doing a secured loan, the lender will only allow you to borrow up to the appraised value of the collateral given. The interest rates on secured loans however are slightly lower compared to unsecured ones.

Pros

  • Interest rates are more affordable than unsecured loans
  • Amount lendable is higher compared to unsecured loans
  • No need of perfect credit rating

Cons

  • Require collaterals before approval
  • In the event of default, the lender sells the security to recover the amount owed
  • Longer repayment periods

Unsecured loans

These loans are also known as personal loans, and as the name suggest, these types of loans are not secured against the borrower’s assets. These loans carry high risks, and they may involve lengthy procedures to get.

Unlike secured loans, these types of loans depend on your income and credit history to assess your eligibility. They are available in many marketing packages including personal loans, credit card debt, monthly loans, debt consolidation and many others.

Unsecured loans command slightly high-interest rate compared to secured loans because;

  • The lender’s options for recourse are limited in the event of default by the borrower
  • They carry a high risk of collectability in the event of insolvency

If the event of default, the lender will have to exhaust all the collection options available to recover the amount.

Pros

  • Collateral is not a requirement
  • Idea for consumers borrowing a small amount
  • No risk of losing asset in the event of default

Cons

  • Shorter repayment periods which translate to higher payment amounts
  • High-interest rates because there is no security
  • Lengthy procedures before approval

There are other types of loans, but they all revolve around these two major categories. However, the decision on the type of loan to borrow remains up to you. Any time you think about borrowing a loan carefully analyze your personal circumstances and make sure you borrow the least amount possible.


As a licensed money lender and the best moneylender operating in Singapore, all our loans are legal. The only difference between our loans is secured or unsecured. Unsure of which type of loan is more suitable for you? Contact us and let us know your questions, we will do our best to answer your queries. Want to know how it works? Check out our page to find out more. Ready to apply? Just have to fill in a simple application form and we will call you as soon as possible regarding your application.

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