The former is tailor-made for homeowners in that secured personal loans require the borrower to put up collateral, against which the loan is given. The collateral can be anything of value. However, the trend is to use the home as security, which has led to secured personal loans being loosely termed as homeowner loans. The advantages with a secured loan are various. The repayment term is long, the interest rate comparatively low, and a substantial amount can be borrowed. Of course, the drawback is that borrowers can lose the collateral in case of a default in the repayment.

Unsecured loans are different in this regard. There is no need for the borrower to put up collateral in order to procure an unsecured personal loan. However, the absence of security puts the lenders at risk. To compensate for the risk, they issue higher rate of interest with this loan type. There are other advantages with unsecured personal loans. One is the expediency of processing; the lack of paperwork that secured loans entail is absent in this case. The other advantage – though this is arguable – is that they can be more freely procured in the market. People are less willing to risk their homes to avail a loan. However, recent trends in the UK have suggested that borrowers are looking at the option of secured personal loan with more seriousness.