Secured loans and unsecured loans are two primary financing options available to borrowers. A secured loan is backed by collateral, such as a home or car, while an unsecured loan is not. For example, a homeowner might take out a secured loan against their house to finance a home improvement project, while a student might take out an unsecured loan to cover tuition costs.
Secured loans often have lower interest rates and more favorable terms than unsecured loans, as the collateral reduces the lender’s risk. Unsecured loans, on the other hand, are more accessible but typically come with higher interest rates.