If you are planning to avail a loan yourself sooner sometime and trying to figure out which loan can be better for you to apply for, you must have already come across terms like secured loans or unsecured loans. To understand which type of loan is most suitable for your purpose and per your financial condition, knowing the basic difference between secured and unsecured loans is very important. Before delving into differences, it is important to understand what secured and unsecured personal loans are.

personal loans

What is a secured personal loan?

In a secured personal loan, you need to keep collateral against the loan amount you are applying for; that is for example you can keep your car, bike, or garage as a form of security for repayment of your loan in case you fail to pay directly.

But, in an unsecured loan, you don’t need to have any collateral against the loan amount and the verification will only be done by checking your income, credit score, etc.

Secured or unsecured – what’s the difference?

In contradiction to the concept of secured personal loans, unsecured loans are not offered against any collateral which means even if you fail to repay the loan, you’re existing, or used properties will not be at direct stake.

However, because unsecured personal loans are offered without any guaranteed collateral, the loan amount offered by the banks and lenders is often smaller.

Since unsecured loans do not require any security from the borrower, it is kind of a risk on part of the lender, which is why these loans come with a higher rate of interest. But it is a great alternative for people who can’t apply for secured loans due for any reason.

Reason for Popularity of unsecured personal loans:

The most advantageous part of unsecured loans is that the borrower does not need to provide any collateral when in the case of secured loans whether your car, property, or any other form of collateral, you need to offer against the loan.

The lender does not look for the collateral which you have to offer, rather your credit score, income, and ability to repay the loan are verified and assured before processing the loan. This is the reason why people who do not have any collateral to offer to get the chance to avail of a secured loan, prefer to apply for an unsecured personal loan.

Providers of Unsecured Personal Loans

The following are the places where you can get unsecured personal loans –

  • Banks
  • Finance companies
  • Credit unions
  • Online lenders
  • Small personal lenders

These lenders have well-defined criteria for eligibility and interest rates. Since the interest rates are anyway higher compared to secured loans, all you can do to save a bit on interest is to compare among more than one provider.

Limit of unsecured personal loans:

Now, the limit of unsecured loans that you can borrow varies among different lenders in Australia. While some lenders may offer as much as $70,000 for the tenure of seven years, most borrowers have a maximum limit of $50,000 which needs to be paid back within 5 years or so. So, this kind of loan can be useful for you when your requirement is around $50,000 or so.

Primary Advantages:

Some of the common advantages of unsecured loans are-

  • No Need for Collateral: you can seek a loan without putting your properties or assets at risk as collateral.
  • Fast: these loans are processed faster compared to secured loans. Many lenders offer to disburse unsecured loans within a few days, which can be very helpful in emergency needs.
  • Variable Use: these loans are available for a wide range of purposes from education to home renovation. When you are acquiring personal loans, you don’t need to put forth documentation as well.


Since interest rates for unsecured personal loans are higher, make sure when you seek to go for the loan you cross-check your income scale and accordingly plan your repayment schedule too. Even though there is no collateral at stake, lenders often have their stringent way of acquiring defaulter repayments. It is always suggested to read all the papers and guidelines before applying for a loan. However, if you are efficient enough and you are seeking a fast-processing loan without security, this is perhaps the best option to pick and try for any personal financial need.