What are the differences between secured and unsecured loans?

Secured loans are loans backed by collateral, such as a house or car, which the lender can seize if the borrower defaults. Common examples include mortgages and auto loans. Because of the collateral, secured loans typically have lower interest rates and more favorable terms. Unsecured loans, on the other hand, are not backed by collateral. They rely on the borrower’s creditworthiness to determine eligibility. Examples include personal loans, credit cards, and student loans. Due to the lack of collateral, unsecured loans often come with higher interest rates and stricter approval criteria.