Not a homeowner? Don’t worry – an unsecured loan is still a good borrowing option.
Secured vs. unsecured loan
Deciding whether to secure your loan will determine:
- How much money you can borrow
- Your interest rate
- The turnaround time for your loan application
- How long you can take to pay your loan back
Whether you can secure your loan also depends on the assets you have available.
What is a secured loan?
A secured loan is backed by an asset (most commonly it’s backed by the value of a house). When you secure your loan, the lender puts a “lien” on your asset. The lien acts as a layer of security for the lender – if you don’t pay your loan back, the lienholder can assume ownership of your asset. By choosing to secure your loan, the lender has greater confidence that you’ll pay back your loan, and therefore offers you a lower interest rate.
The most common example of a secured loan is a first mortgage; when a person decides to take out a mortgage to buy a house, they secure the money they borrow (the mortgage) with their new home. A secured loan allows homeowners to access lower interest rates and more money (plus, you can take longer to pay back the loan).Once the mortgage is paid back, the lien is lifted from the house.
What is an unsecured loan?
Not a homeowner? No problem – Moneylite’s unsecured loans are a great borrowing option. Or maybe you are a homeowner, but need quicker access to money – an unsecured loan might be a better option for you. An unsecured loan is backed by a loan agreement (signed contract), rather than an asset.
The borrower and the lender work together to determine the loan size (how much can be borrowed), term (how many months the loan can be paid back over) and interest rate.Then, the borrower signs a contract that states they agree to pay back the loan amount over the course of the term and at the interest rate that was agreed upon. An unsecured loan doesn’t require someone to be a homeowner to borrow money.
I’m a homeowner. Does that mean I should secure my loan?
We typically recommend that homeowners secure their loan to take advantage of lower interest rates and greater borrowing power. However, the loan type you should choose depends on your priorities:
- Are you consolidating debt? A secured loan can help you access the best possible interest rate, and ultimately help you become debt-free sooner.
- Facing an unexpected expense and need quick access to money? An unsecured loan generally has a quicker application process.
- Do you need a large loan amount? With secured loans, you can borrow up to $ 35,000 from Moneylite (compared to a maximum of $ 20,000 with unsecured loans), making secured loans a great option for home renovations and home repairs.
- Do you like having the flexibility of paying off your loan early? Moneylite’s unsecured loans have no prepayment penalties.
Interested in a loan? Here’s how to get started:
- Start with an online loan quote : Simply enter a few details about yourself and we’ll determine your best loan option.
- Receive your decision in minutes : Find out how much money you could qualify for, and what your payments might be (note: this loan quote will be for an unsecured loan).
- Interested in a secured loan? Let us know : A Lending Specialist will be in touch after you submit your application. Since your quote will be for an unsecured loan, let us know you’re interested in securing your loan, and we’ll be happy to update your quote.
- Receive your money : Finalize your loan application in-branch and receive your money quickly.
Already a Moneylite customer and want to switch to a secured loan? Contact your local branch to see what borrowing options are available to you.