Reviewed September 2026.
A secured personal loan pledges collateral (often a savings account, certificate, car, or other asset the lender accepts) so the lender can seize or freeze that asset if you default. An unsecured personal loan relies on your credit and income with no pledged asset. Broader loan-type map (auto, cards, share-secured): Secured vs unsecured loans. This page stays on the personal installment choice.
Side-by-side for personal installment loans
| Secured personal loan | Unsecured personal loan | |
|---|---|---|
| Collateral | Yes (savings/CD pledge, vehicle, other accepted assets) | No |
| Typical APR | Often lower for the same borrower when collateral is strong | Often higher; strong credit narrows the gap |
| Approval path | Asset value + credit + income | Credit + income (+ sometimes relationships) |
| Default path | Levy on pledged cash, repossession of pledged vehicle, plus possible deficiency | Collections, charge-off, lawsuit risk; no automatic car grab |
| Common brands of product | Credit-union share-secured loans; some bank “savings-secured” notes | Online lenders, banks, CUs offering standard personal loans |
Credit-building cousins (locked funds, graduation paths): Secured loan to build credit, Credit-builder loan.
Collateral tradeoffs in dollars
Suppose you need $5,000.
| Option | Illustrative pricing | What you risk |
|---|---|---|
| Share-secured CU loan at 8% APR, 24 months, nets $5,000 | Payment ~$226; interest ~$427; $5,000 savings locked | Liquidity freeze; default hits the pledged savings |
| Unsecured at 16% contract interest, 3% fee deducted, note $5,000 (nets $4,850) | Payment ~$245; interest ~$880; true APR ~19.1% on cash received | No asset pledge; $150 funding shortfall vs a $5,000 need |
| Unsecured sized to net $5,000 after 3% fee (~$5,155 note) at 16% interest | Payment ~$252; compare on equal cash received | Same collateral-free path, honest proceeds match |
| Unsecured at 11% APR, $0 fee, nets $5,000 | Payment ~$233; interest ~$593 | Best of both if you qualify |
Match net cash before ranking APR. A deducted fee means the flyer 16% is contract interest, not the APR on dollars received. If the $5,000 in savings is your only emergency buffer, pledging it can be costlier than paying a higher unsecured APR. If you have $15,000 in cash and only lock $5,000, share-secured can be a cheap installment tradeline.
When secured personal loans fit
- A credit union offers share-secured pricing far below your unsecured quotes.
- You are rebuilding credit and accept locked funds as the price of a cheaper rate (Thin file or bad credit options).
- You will not need the pledged cash during the term.
When unsecured personal loans fit
- You refuse to put a car title or rent money at risk for a 2–4 point APR cut.
- Soft shopping already shows a competitive unsecured APR (Compare personal loan offers).
- The expense is a standard personal-loan use case (When to use a personal loan).
Checklist
- List assets you cannot afford to lose (work car, last emergency cash).
- Price secured and unsecured quotes with the same amount and term.
- Read repossession, setoff, and deficiency clauses in plain language.
- Soft-prequalify where possible; limit hard applications.
- Do not pledge essential collateral to finance a lifestyle purchase.
Educational only. Not personalized financial or lending advice. Collateral rules and remedies vary by lender and state.