The difference between secured and unsecured loans

The number of available loan options today is huge and there are loans for various purposes. This can be anything from SU loans, mortgage loans in connection with the purchase of housing, car loans to consumer loans. All these different types of loans offer very different interest rates, fees and terms. And there is also a good reason.

Many loan options

Apply for a loan Fill only one application and receive offers from several banks. Free and no obligation application now

Low interest rates on secured loans

“ But not everyone has the option of a secured loan, as, as I said, it requires an asset that the lender can obtain security in.

When we speak secured loans such as mortgage loans, cooperative housing loans and in some cases also car loans, it is the loan where the lender has collateral in the form of an asset – for example housing or car. This means that the lender may demand the asset sold if you, as the borrower, do not pay off your loan on time. Therefore, you also find that the interest rate and the APR are lower on secured loans, as the lender’s ability to get his money back is greater by a secured loan. But not everyone has the option of a secured loan, as, as I said, it requires an asset that the lender can get collateral in. The alternative to the secured loans is the unsecured loans that do not require you, for example, to have a home or car.

The unsecured loans

Unlike secured loans, where money is to be used for a particular purpose such as buying a home, you can use unsecured loans to spend money for whatever you want. Unsecured loans cover, among other things, overdraft facilities, consumer loans, quick loans, SMS loans, mini loans and micro loans. The loan size of an unsecured loan is typically between DKK 5,000 – 400,000 and with a maturity that varies from anywhere from 3 months to 15 years.

With an unsecured loan, the lender is not sure of an asset as with a secured loan. The only security for an unsecured loan is the borrower himself. Therefore, you also experience higher interest rates and APR on the unsecured loans, as the lender runs a greater risk by lending out his money. It is especially on the so-called quick loans and mini loans that one experiences very high interest rates and APR. Therefore, in most cases you will also find the cheapest unsecured loan if you choose a “real” consumer loan rather than, for example, a quick loan and SMS loan.