Difference Between Secured & Unsecured Loans

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The difference between a secured and unsecured loan is that secured loans have some sort of physical collateral backing up the money. Unsecured loans require only a signature, but generally the borrower must have a high credit score. Obtain a secured or unsecured loan with advice from a financial adviser in this free video on loans.

Part of the Video Series: Credit Cards & Personal Loans
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Video Transcript

Hi, this is Matt McKillen with Innovative Financial Group. A question posed to me today, what is the actual difference between a secured and unsecured loan. Well it's part of the, both words. It's called security. Now security is basically defined that on a secured loan, the lending institution or bank has some type of collateral on that loan. For example, as a car title. If you're doing a secured loan and they have your car title, and you don't make the payments, guess what happens? They send someone out to repossess the vehicle, sell it to pay off the money that was owed on the loan they gave you. An unsecured loan on the other hand, is basically a loan that is secured by nothing more than a signature. You're just promising to pay them back. It's a much higher risk loan for the bank and generally the banks require a much higher credit score in order to get an unsecured loan versus a secured and they limit how much money they'll lend on a unsecured loan versus a secured. So again, the difference between an unsecured and secured loan is the security or the collateral that's being taken or not taken by the bank. Again, my name is Matt McKillen, I'm with Innovative Financial Group.

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