Secured vs unsecured loans: what is the difference?

When you borrow money, the lender wants to know what happens if repayments stop. A secured loan uses an asset as security. An unsecured loan does not.

Secured loans

• The loan is backed by an asset, such as the car, bike or boat you are buying.
• Rates are usually lower because the lender has less risk.
• If you cannot repay, the lender can sell the asset to recover the debt.

Unsecured loans

• No asset is held as security.
• Rates are usually higher and the criteria stricter.
• Often used for smaller amounts or when there is no suitable asset.

Which is right for you?

If you are buying a vehicle, a secured loan is typically the more affordable route. For debt consolidation or other uses, it depends on whether you have an asset you are comfortable using as security and how much you are borrowing. Always compare the comparison rate, which includes most fees, as well as the headline rate.

Updated October 2026. General information only; not financial, legal or tax advice.