Secured loans often come with a lower APR (interest rate + costs & fees) than unsecured loans, as they are deemed less risky by lenders. In addition, secured loans also tend to have higher borrowing limits, which is ideal for consumers looking to obtain large funds. Furthermore, borrowers with lower credit scores may find it easier to get approved for a secured loan if they have an eligible asset to include as collateral.
On the other hand, secured loans do run the risk of borrowers having the assets they choose as collateral becoming repossessed. Furthermore, if an asset does not cover the unpaid loan amount, lenders can take additional actions to recover funds. Secured loans also tend to have more restrictions for use than unsecured loans. It’s important for prospective borrowers to understand the risk of secured loans, and whether it is the right choice based on their financial situation and ability to make regular payments.