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Secured vs. unsecured loans
A secured loan is backed by collateral — an asset you own that the lender can sell if the loan isn't repaid. An unsecured loan is backed only by your promise to repay. Because collateral lowers the lender's risk, secured loans are usually priced lower and lean less on your credit score than unsecured loans do.
What makes a loan 'secured'?
A loan is secured when a specific asset backs it. If the loan isn't repaid, the lender can sell that asset to recover the money. A mortgage (secured by a house) and a collateralized loan on MarketLoan (secured by a watch, ring, or car) are both examples.
An unsecured loan — most credit cards, most personal loans — has no asset behind it. The lender relies on your credit history and income, and on your promise to pay.
How does this change the cost?
Without collateral, a lender charges more to cover the risk of not being repaid. With collateral, that risk is much lower, so a secured loan is usually cheaper. This is the whole reason MarketLoan exists: a loan that's genuinely secured should be priced accordingly.
What's at risk with each?
With an unsecured loan, missing payments damages your credit and can lead to collections. With a secured loan, the specific asset you pledged is what's at stake — if a loan isn't repaid, it's sold to cover the debt, a consequence disclosed clearly before you accept any offer.
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