What is the difference between secured and unsecured loans?

Secured loans are backed by collateral, such as a house or car, which reduces the lender's risk. Unsecured loans have no collateral and rely only on the borrower's creditworthiness.

Lenders judge creditworthiness by your ability to repay — your credit history, income and financial stability. Higher creditworthiness means lower risk for the lender and better loan terms for you.