Secured Loan vs. Unsecured Loan: Similarities and Differences
July 6, 2021 | Louis Tully
Not many people tend to encounter terms such as secured and unsecured when applying for loans, so when it does come up, it may confuse some people, making them think the loans are more complicated than they thought.
In reality, the terms have a pretty simple explanation, and the meaning doesn’t complicate the loan process in any way.
In the article below, we’ll break down the similarities and differences of a secured loan vs. unsecured loan, and which may suit your situation better.
Here Are the Differences Between a Secured Loan vs. Unsecured Loan
1. Secured Loans Require Collateral
To put it very simply, a secured loan requires you to put up an asset as collateral or provide a guarantor as one of the requirements to get approved for the loan.
Title loans, for example, are a type of a secured loan. They require you to leave your car title with the lender to act as collateral for the duration of the loan repayment period.
An unsecured loan, on the other hand, doesn’t call for a guarantor or any assets as collateral for the loan. As long as you satisfy the lender’s qualifying requirements, you’ll get approved and get your cash without leaving anything with the lender.
Payday loans would be a good example of short-term fast unsecured loans.
2. The Loan Amount
Another difference between the secured loan vs. unsecured loan is the maximum amount of cash you could get, with secured loans typically being much larger.
At Cash Cow, for example, you can get up to $300 with payday loans and up to $1,400 with title loans.
3. The List of Required Items
Another important difference between a secured loan vs. unsecured loan is that each of them has a different list of requirements.
Here’s a list of required items for title loans that you can get from Cash Cow:
- A state-issued ID/driver’s license to prove you’re over 18;
- Your car;
- The car’s lien-free title in your name.
For payday loans you’ll need:
- A government-issued ID to prove you’re over 18:
- Your most recent pay stub as proof of income;
- A blank check from an active checking account in your name.
4. Proof of Income
You don’t need to be employed to get a secured loan. If you apply for title loans, you likely won’t even be asked for proof of income.
An unsecured loan is a little more complicated. You do need to be able to prove your ability to repay the loan to get approved. Usually, the lender asks for your most recent pay stub to determine the amount of loan you qualify for, as well as when you’ll be paying the loan off (usually on your next payday – hence the name).
With Cash Cow, however, if you’re able to provide alternative proof of income (say you’re getting some kind of benefit or compensation), you might still be able to get a payday loan.
Here’s What’s Similar Between a Secured Loan vs. Unsecured Loan
1. Time Frame
The process is typically the same for both types of loan – around 30-45 minutes on average, depending on the state of the required items you provide the lender with.
2. No Perfect Credit Is Required
Unlike loans you can get from a bank, short-term loans don’t require perfect credit. Cash Cow in particular, accommodates all types of credit situations for both types of loans.
As long as you provide the required items that are up to par with the standards, you still have chances to get your chosen loan regardless of what your credit looks like (it can be bad, or it can be outright nonexistent). It doesn’t matter if you’re applying for a secured loan (title loan) or an unsecured one (payday loan).
3. The Process
The procedures of getting a title loan and a payday loan look quite similar. You get started by submitting an online request form on the website to send your information to the closest location.
When your form gets processed, a loan representative from that location will give you a call. The representative will provide more in-depth information about your prospective loan and schedule an appointment for you.
You’ll need to bring the required items to that appointment (the ID/driver’s license, your vehicle and its lien-free title in your name for title loans; the ID, proof of income, and a blank check from an active checking account in your name for payday loans in Louisiana). The representative will decide if you qualify for the loan and on what terms based on the required items.
If they decide to approve you, you’ll finish the final paperwork then and there – and get the cash.
Get Started Today!
Now that you know what the main differences between a secured loan vs. unsecured loan are, choose the type that works best for you and apply RIGHT NOW! You could get anywhere between $100 and $1,400 TODAY!