An unsecured loan is a loan whereby the borrower does not have any collateral of any kind on the note. There are also unsecured credit cards, which mean the creditor is entrusting the borrower to pay back all of the monies owed on the credit approved. An unsecured loan is always approved at a higher interest rate (or APR) so that the lender(s) can recover their defaulted client(s) money by hiking up the rates of the ALL unsecured loans.

An unsecured loan is the kind of loan that puts the borrower in the category of a “high risk”, meaning that bank or private lender is fully aware that the borrower (client) is more likely to default on the loan, or be sporadic with repayment. These high risk borrowers are generally “thought of” by the general public as discouraged borrowers by bankers – this could not be further from the truth.

The ideal borrower for banks is one that can get approved for a high-risk, high APR loan, is forced to a very high interest rate, because of their bad FICO score, BUT yet the borrower is solid, hard working, and trustworthy. More often than not, a so-called high risk unsecured borrower DOES make the payments on time and in full. The vast majority of these borrowers will pay back the money they have borrowed from the bank in full and completely, creating a very profitable cash flow for the lending institution. 

A secure loan is a loan when the borrower agrees to put their home, property, house, car, boat, motorcycle, bonds, stocks, etc., down as a form of collateral against the note. A secured loan usually means the borrower will get a much lower interest rate on the loan from the bank or private lender. Of course these are the preferred loans given by banks.

Related posts:

1. Ohio Secured and Unsecured Loans (part 2) Part 2 of Our Mini-Series on Secured and Unsecured Loans As promised, to our readers in Ohio (and elsewhere) we are working through the Christmas Season and posting the continuation of our mini-series on secured and unsecured loans. The advantages to mortgages is that interest...
2. Ohio Secured and Unsecured Loans (part 1) Part 1 of Our Mini-Series on Secured and Unsecured Loans I know this article is obviously not specific to Ohio only, but this article on secured and unsecured loans (and debt), is food for thought for anyone who wants to come by for a read. ...

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