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What is a secured loan?
A secured loan is backed by an asset you own, such as a car, savings account, or home equity. If you don’t repay, the lender can claim that asset. Because the lender takes on less risk, secured loans usually offer:
- Lower interest rates
- Higher borrowing limits
- Easier approval, even with weaker credit
What is an unsecured loan?
An unsecured loan requires no collateral. The lender approves you based on your creditworthiness and income alone. Most personal loans in Canada are unsecured. They’re convenient and lower-risk for you, but they tend to come with:
- Higher interest rates
- Stricter credit requirements
- Smaller maximum amounts for many borrowers
Side-by-side comparison
- Collateral: Secured = required · Unsecured = none
- Rates: Secured = lower · Unsecured = higher
- Approval: Secured = easier · Unsecured = depends on credit
- Risk to you: Secured = you could lose the asset · Unsecured = no asset at risk
- Best for: Secured = larger amounts or rebuilding credit · Unsecured = smaller, fast borrowing
Which should you choose?
Choose a secured loan if you want the lowest rate, need a larger amount, or have credit challenges and own an asset you’re comfortable pledging. Choose an unsecured loan if you have decent credit, need money quickly, and prefer not to risk your property.
Tips before you sign
- Compare the APR (not just the interest rate) across both options.
- Understand exactly what happens if you miss payments.
- For secured loans, confirm how the asset is valued and held.
- Only pledge collateral you can afford to risk.
Frequently asked questions
Is a secured loan safer? It’s lower-risk for the lender, but riskier for you because your asset is on the line.
Can I switch from unsecured to secured later? You’d typically apply for a new loan; some lenders offer refinancing.
Do secured loans build credit? Yes — on-time payments are reported just like unsecured loans.
Compare both types in one place. See personal loan offers →
Disclaimer: LoanWave.ca is an affiliate / comparison website. We are not a lender and do not provide loans. We may earn a commission from partners. Rates and terms are set by lenders. Informational content only, not financial advice.