Secured Or Unsecured? Know Which Loan Is Best For Your Needs

There’s no doubt that when it comes to loans, there’s always a certain degree of risk involved for the lender, whether it’s a bank or a legal money lender in Singapore.

For some loans, the lender could allow borrowers to loan a sum with only their word as a guarantee of paying it back. But if the loan is much more significant in amount, the borrower may be required to provide key assets to serve as security if they default on their payments.

This simple difference is what divides loans into two categories: unsecured and secured loans. Read on to know which type is better for your needs and budget.

Secured loans

Secured loans are a type of loan protected by an asset of immense value to the borrower, such as their car, house, and other items of interest. In the context of loans, the proper term for such assets is called collateral. If a borrower applies and is approved for a secure loan, the lender has the right to repossess or take whatever items they provide as collateral, but if and only if they default on their payments.

In the event that the lenders take the borrower’s collateral, they typically sell it off to interested parties and use the earnings to pay off the loan. Do note that the debt isn’t cleared yet, even if the assets are sold. If the property doesn’t sell high enough to cover the loan completely, the borrower will still be obligated to pay off the remaining balance.

Unsecured loans

Unlike the former, unsecured loans, also known as personal loans, don’t require the borrower to put up their belongings as collateral just to get approval. This characteristic is generally the reason why it’s the more preferred loan type for most people. But do note this advantage comes at a price, mainly in the amount that can be borrowed, which is far less than that of secured loans.

Given the lack of tangible security, unsecured loans naturally require other ways to guarantee that borrowers can pay off what they owe. Thus, financial institutes use certain metrics to gauge the likelihood of their clients defaulting in payments. A popular metric typically used is the credit score, but other factors are also considered, such as annual income. If a borrower passes all their requirements, they can then be eligible for receiving an instant loan in Singapore.

Which type of loan should you go for

The loan that’s best for your needs will largely depend on several key factors, such as the desired loan amount, willingness to provide collateral, and credit score, to name a few. If a borrower needs a loan that exceeds the maximum amount that an unsecured loan provides, they’ll have to opt for a secured loan instead.

Otherwise, if a borrower has maintained a good credit score, then the unsecured personal loan is the best option for them. Apart from being collateral-free, this loan caters to borrowers of all income ranges.

Thus, even if they don’t meet the minimum annual income set by certain banks and moneylenders, they’ll still be able to loan a fixed yet sizable sum. But if ever a borrower meets or exceeds their requirements, they’ll have the privilege of loaning a higher amount, usually a multiple of their annual income.


If you only need a helping hand to get you out of an unexpected financial bind, then it’s better to go for a personal loan. With such a loan, you’re free to either spend it on whatever necessity requires your immediate attention or simply for your pleasure.

Additionally, unsecured loans generally have shorter loan terms, meaning you’ll have to pay significantly less interest, resulting in more savings for you.