Definition of Secured & Unsecured Loans
Usually, a person acquires a loan to buy property, such as a car, or to pay off debt. But all loans are not the same. Some require collateral and some may be given unsecured.
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Unsecured Loan Definition
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An unsecured loan is an amount of money that a financial institution lends to an individual solely on the basis of that person's ability to repay it in the future. Thus, an individual's personal finances such as credit history, income and credit score are considered before a loan is approved.
Secured Loan Definition
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A secured loan is lent by a bank or institution contingent on some type of collateral or security. Collateral, such as cars or property, assures that the lender will receive payment or the collateral if an individual defaults.
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Types of Loans
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Unsecured loans include student loans and personal loans from financial institutions or even loans between friends or family members. Examples of secured loans include mortgages, vehicle loans and a home equity line of credit.
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References
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