When you get a loan from a bank or other financial institution, it can be either secured or unsecured. You can secure your loan by pledging something of considerable value in case of default. This is called collateral. An unsecured loan is borrowing money without any collateral backing the loan.
Secured loans allow the lender to own the assets pledged as collateral if the loan cannot be repaid. This exposes you, the borrower, to greater risk, but reduces the risk for the lender. Because of this, secured loans are easier to approve and less expensive.
