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When thinking about borrowing money, you need to carefully consider all
options. Current rates, the amount you need to borrow, terms of repayment and
your current obligations can all have a significant impact on your loan choice.
And you'll find that there are many loan options, too - each designed for a
specific borrowing purpose. You'll want to be certain that the loan you're
applying for is the one that best matches your borrowing needs.
When shopping for a loan, you'll probably hear the terms Unsecured and Secured.
What are they? What do they mean? Which is best for you? Read on for the
details.
Unsecured Loans
When you apply for a loan that is unsecured, the lender believes that you can
repay the loan on the basis of your financial resources. Granting the loan is
not based upon "collateral" - meaning that you do not have to give the lender
rights in a specific asset, like your home or car, as security in case you
become unable to repay.
Unsecured loans are usually offered at higher rates than secured loans and have
lower borrowing amounts.
Examples of Unsecured Loans:
Personal Loans
Personal Lines of Credit
Student Loans
Some Home Improvement Loans
Secured Loans
A secured loan is usually needed when borrowing larger amounts to fund major
purchases. A secured loan is contingent upon the borrower providing
"collateral" to ensure repayment. For example, a popular secured loan is a home
equity loan. To obtain a home equity loan, you must give the lender rights in
your home as collateral; a mortgage is written against it. Likewise, with an
auto loan, you are using the auto as the collateral for the loan. In the case
of default, the lender can take possession of the vehicle.
Secured loans usually offer lower rates, higher borrowing limits and longer
repayment terms than unsecured loans.
As the term implies, a secured loan means you are providing "security" that
your loan will be repaid according to the agreed terms and conditions. It's
important to remember, if you are unable to repay a secured loan, the lender
has recourse to the collateral you have pledged and may be able to sell it to
pay off the loan.
Examples of Secured Loans:
Home Equity Loan
Home Equity Line of Credit
Auto Loan (New and Used)
Boat Loan
Recreational Vehicle Loan
Home Improvement Loan
A Dollar Bank Representative will help you determine what type
of loan you need for your borrowing situation.
To try our loan calculators, click here.
The information presented in this publication is general in nature; it is not
our intention to provide specific advice to individuals or a comprehensive
discussion of the subject matter. We suggest that you consult with your
financial or tax advisor, accountant or attorney to obtain specific advice or
comprehensive information.
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Equal Housing Lender. Member FDIC. Copyright © 
