When you’re weighing your personal loan options, understanding the difference between secured vs. unsecured personal loans helps you choose confidently. Both can fund goals like consolidating debt, tackling a project, or covering an unexpected bill, but they work differently and suit different situations.
Secured vs. Unsecured Personal Loans
Learn the difference between secured and unsecured loans and how to choose the right personal loan for your situation. Compare features, rates, and risks, and see how People Driven Credit Union (PDCU) can help.
Quick Comparison
| FEATURE: | SECURED LOAN: | UNSECURED LOAN: |
|---|---|---|
| Collateral Required? | Yes—often savings or a Certificate of Deposit (CD) | No collateral required |
| Typical Interest Rates | Generally lower because of collateral | Generally higher, based on credit and income |
| Approval Odds | Often more flexible, helpful for building credit | More dependent on credit history and debt-to-income |
| Risk | Collateral may be used to satisfy the debt if you default | No asset at risk, but missed payments still impact credit |
| Best For | Lower rate seekers, credit builders, keeping existing plans for savings/CDs | Fast funds, strong credit, no desire to pledge collateral |
What Is a Secured Loan?
A secured loan is backed by collateral something of value you already own. At credit unions, collateral often includes savings or a CD. Because the lender has security, secured loans typically offer competitive rates and can be a good fit if you’re establishing or rebuilding credit.
- Potentially lower rates compared to unsecured loans
- May improve approval odds if your credit is limited or recovering
- Your savings/CD can continue to earn while you borrow
What Is an Unsecured Loan?
An unsecured loan doesn’t require collateral. Approval and terms are based on creditworthiness, income, and overall ability to repay. If you have strong credit and want a streamlined, collateral-free option, an unsecured loan may be the better fit.
- No asset tied up as collateral
- Straightforward process and quick access to funds
- Best for borrowers with solid credit and stable income
Which Option Fits Your Situation?
- Choose secured if you want the most competitive rate and you’re comfortable pledging collateral (like savings or a CD).
- Choose unsecured if you prefer not to pledge collateral and if your credit and income support approval.
- Unsure? Compare estimated monthly payments and total interest cost over the life of each option—not just the rate
People Driven Credit Union loan rates as of today:
-
- Unsecured Personal Loan rates as low as: 11.04%¹ APR*
11.04%
- Share (savings) Secured Loan Personal Loan rates as low as: 5.25%¹ APR
5.25%
- CD Secured Personal Loan rates as low as: APY + 3.50%¹ APR*
- Unsecured Personal Loan rates as low as: 11.04%¹ APR*
How People Driven Credit Union (PDCU) Can Help
We offer both secured and unsecured personal loans and will walk you through the numbers so you can choose with confidence.
- Unsecured Personal Loans
- Secured Personal Loans
- Need help improving your credit or budgeting? PDCU members can access GreenPath Financial Counseling.
Frequently Asked Questions: Secured vs. Unsecured Personal Loans
Q: What’s the core difference between secured and unsecured loans?
A secured loan requires collateral (like savings or a CD) that the lender can claim if you default. An unsecured loan does not require collateral and relies on your credit, income, and debt-to-income ratio.
Q: Which option usually has the lower rate?
Secured loans typically come with lower rates because the collateral reduces lender risk. Unsecured loans often carry higher rates, but may be preferable if you don’t want to tie up assets.
Q: Will either type help my credit?
Yes. Making on-time payments on either loan type can help build or strengthen your credit over time. Late or missed payments on either will hurt your credit.
Q: What can I use as collateral for a secured loan at a credit union?
Common options include a Share (savings) Secured Loan or a CD Secured Loan. Your funds remain on deposit and may continue to earn dividends while you repay the loan. Ask PDCU which collateral types qualify today.
Q: Is an unsecured loan harder to get?
It depends on your credit profile and income. Unsecured approvals weigh factors like credit score, payment history, and debt-to-income ratio. If these are strong, approval can be fast and straightforward.
Q: What happens if I miss payments?
Missed payments on either loan can lead to fees and negative credit reporting. With a secured loan, the pledged collateral may be used to satisfy the debt if you default. If you’re struggling, reach out early—we can discuss options, and PDCU members can access GreenPath.
Q: How do I choose between them?
Compare the total cost (rate, fees, and term), your comfort with pledging collateral, and how quickly you need funds. PDCU can run side-by-side estimates so you can see monthly payments and lifetime interest for each path.
Important Information: All loans are subject to approval. Terms and conditions, including rates, are based on creditworthiness and, for secured loans, acceptable collateral. Membership eligibility required. Fees may apply. Program terms subject to change without notice.
Still Weighing Your Secured vs. Unsecured Personal Loans Options?
PDCU offers both secured and unsecured personal loans. If you know what you need, you can apply online in minutes. If you’re still deciding, a PDCU team member can run side-by-side estimates so you can see exactly what each option costs.
Apply for a Personal Loan
Apply for a secured or unsecured personal loan online. PDCU offers both options with competitive rates. Loan approval, rate, and terms are subject to creditworthiness and membership eligibility. Secured loans require acceptable collateral such as a savings account or CD.
Not Sure Which Loan Fits?
PDCU members have access to free financial counseling through GreenPath. Whether you want help comparing loan options, working on your credit, or building a budget, GreenPath counselors are available to help you make the most informed decision.
All loans subject to approval. Rates, terms, and conditions are subject to change and are based on creditworthiness. Secured loans require acceptable collateral. Membership eligibility required. Fees may apply. We lend in accordance with fair lending laws. Federally insured by the NCUA. NMLS #776727. Secured vs. Unsecured Personal Loans
