If you’re on the hunt for a personal loan, one question that may be on your lips is, should I choose a secured or unsecured loan?
Ultimately, the type of loan you choose could influence things like the interest rate you receive, what you can borrow for and what fees are attached to the loan.
So which personal loan is right for you? Let’s break it down:
If you have some assets, like a car or a home, you may qualify for a secured personal loan. An example of a typical type of secured loan is a car loan, used to purchase either a new or pre-loved car.
Because you are putting up your goods as collateral, these types of loans often come with lower interest rates and fees. According to the Mozo database, the current secured variable rate averages sit at 9.04% (not including car-specific loans) and 7.62% (including car-specific loans). However, it’s important to bear in mind that providers of secured loans are able to seize your assets if you default on your loan.
On the flip side, if you don’t have assets to secure against your loan, or you don’t want to put up your car or home as collateral, you could opt for an unsecured personal loan. You might use this type of loan to fund something like a home renovation or to cover an outstanding medical bill.
While borrowers aren’t required to risk their assets against the loan, unsecured loans often have higher fees and interest rates attached to them. For example, at the moment the average variable unsecured personal loan rate on the Mozo database is 10.75%.
What secured and unsecured personal loans are on the market at the moment? Check out these competitive options below.