A loan that is less risky for a lender and is associated with a valuable asset is called a <u>"secured loan".</u>
Rayna needs to get a new set of tires for her car, so she uses her credit card. If she does not pay her bills, there is no asset that can be collected. This means she has received an <u>"unsecured loan".</u>
Jack agrees to take out a mortgage. If he fails to make his payments, the bank may repossess his house. He has received a <u>"secured loan".</u>
A secured loan is a loan which is normally given on a lien. It is ensured by an advantage/hardware. For instance, we can say that anchored advance is taken to a house or a vehicle and it is secured by the equivalent. As it is ensured by the advantage, the financing cost is lower than an unsecured loan and in the meantime, the bank of the advance feels safe.
On the other hand, an unsecured loan refers to a loan which doesn't have any insurance. That is the reason the hazard natural in the loan gets upgraded. Furthermore, accordingly, the financing cost of the unbound credit is higher than the secured loan.
