When looking at your personal loan options, you’ll find two main categories: secured and unsecured. Your choice can greatly impact your interest rate and the loan application process.

 Unsecured personal loans

Unsecured loans are based on your creditworthiness without needing collateral. They’re versatile and can be used for anything from home improvements to vacations. Due to the lack of security, these loans often carry a higher interest rate. However, they offer increased flexibility, with a faster application and funding process, as no asset details are required.

 Secured personal loans

Secured loans, on the other hand, are backed by an asset like a car. The asset serves as collateral, allowing lenders to lower interest rates due to the reduced risk. If you default on payments, the lender has the right to seize the asset and sell it to recoup the loan amount.