Secured vs. Unsecured Loans

Considering taking out a loan? Before you apply, it’s important to understand the difference between secured and unsecured loans. At Asda Money, you can compare unsecured loans from our trusted panel of lenders. We don’t offer access to secured loans. 

But what’s the difference between a secured and unsecured loans? Let’s take a look.  

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Unsecured loans explained  

Unsecured loans are a type of personal loan. With an unsecured loan, you borrow a fixed amount of money from a lender, with a specific time to repay it agreed at the start. You also agree to an interest rate, which affects how much your monthly repayments will be and how much you’ll pay back in total. You can typically borrow between £1,000 and £25,000 with an unsecured loan.  

If you have a good credit score and a history of responsible borrowing, you should be approved for an unsecured loan. Most importantly, you don’t need to put up an asset as security for an unsecured loan.  

Pros and cons of an unsecured loan  


  • Access to money: Once the lender approves your application, you will likely get the money within a few days.  
  • Flexible repayments: You may be able to choose different options around the length of your loan, with terms often ranging from one to seven years. Remember, the longer the term, the more you’ll pay in interest.  
  • Boost your credit score: Making your repayments in full and on time every month can help boost your credit score.  
  • No collateral needed: An unsecured personal loan means you won’t lose your home if you miss your payments. However, defaulting on payments will affect your credit score.  


  • Higher interest rates: Typically, unsecured loans have higher interest rates than secured loans as they represent more of a risk to the lender.  
  • Reliance on credit score: If you have a poor credit history, fewer lenders may consider you for an unsecured loan. It may also be more difficult to secure a low interest rate.  

Secured loans explained  

Secured loans are also known as homeowner loans, as the debt is secured against an asset you own, like your home. If you offer your home as collateral and then miss payments, your home could be repossessed by the lender. 

Secured loans are typically for sums over £15,000 and repaid over longer periods of five to 25 years. The amount you can borrow, and the available interest rate will depend on your credit history, assets and personal circumstances. If you have a poor credit score, you may be offered a lower interest rate with a secured loan compared to an unsecured loan. This is because the lender may be more willing to take on the risk of lending to you if it is secured against your asset.  

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Types of secured loans  

There are several types of secured loans, including:  

  • Homeowner loans: A loan from your current mortgage lender against your home, often used for home improvements.  
  • First mortgage: A loan from a mortgage lender to buy your home.  
  • Second mortgage: A loan from a different mortgage lender, this uses the equity you have available in your home once you have removed the equity used by your existing mortgage provider. 
  • Second mortgages are often used for home improvements or debt consolidation.  

Pros and cons of secured loans  


  • Access to money: You may be able to borrow more money through a secured loan than you would with an unsecured loan.  
  • Application: It may be easier to get a secured loan if you have a poor credit score or are self-employed. 
  • Availability: Some people take out secured loans because they need a larger sum of money and they cannot re-mortgage within an initial fixed mortgage period and would have to pay a penalty for changing this. 


  • Secured against an asset: As the loan is secured against your home or another asset, you may be at risk of losing this asset if you don’t keep up with your repayments.  
  • Longer terms: As secured loans often have longer payment terms; you’ll pay more in interest over the longer term.  
  • Variable interest rates: The interest rates of unsecured loans are often fixed, but secured loans sometimes have variable interest rates. This means your monthly payments may increase in the future.  

What’s the difference between secured and unsecured loans?  

The biggest difference between secured and unsecured loans is the security required for the loan. With unsecured loans, you don’t need to be a homeowner to apply or to put down an asset as a guarantee on the loan.  

You can generally borrow more and sometimes get a lower interest rate with a secured loan, as you’re putting down additional security for the lender which means they are willing to take on more risk. If you get into difficulty with your loan and can’t pay it back, the lender can seize your asset to cover its losses. This isn’t the case with unsecured loans. 

If you’re considering applying for a secured loan vs. an unsecured loan, consider your personal circumstances, your assets and your options should you get into financial difficulties in the future. 

Alternatives to getting a loan  

A loan isn’t the only option you have available.  

Borrowing from family and friends: You may be able to borrow from family or friends, depending on the relationship you have with them. There’s no need for credit checks and they may not charge you interest. If you decide to borrow from family or friends, consider drawing up a loan agreement to make sure everyone is on the same page from the start. You should also consider how borrowing and lending may impact your ongoing relationship.  

Credit card: If you need to make a one-off payment for something, a credit card may be a better option than a longer-term loan. Taking out a credit card and making monthly payments on time is also a good way to boost your credit score.  

Save up: It may take a while, but saving money every month rather than paying off a loan means you won’t go into debt.  

How Asda Money can help?

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At Asda Money, we work with a carefully selected panel of trusted UK lenders. We can help you find the right unsecured loan at the right rate for your needs. A personal loan can help you fund a new car or home improvements, or even your wedding. 

You can typically borrow from £1,000 up to £25,000. All it takes is one eligibility check, and then you can compare loan offers from across our selected lender panel to find the one that’s right for you and your circumstances. Need more information to better understand your finances and the borrowing options available to you? Discover Financial Support at Asda Money.  

Top Personal Loans FAQs:

Why choose a Personal Loan through Asda?

Customers could access great rates from carefully selected trusted lenders, so you can sit back and let us do the leg work. What’s more, when you search for a personal loan, you’ll only have a soft search on your credit history, which means you can check your eligibility without harming your credit score.

Once your loan is approved, you could receive your funds the same day.

How does it work?

Asda is in partnership with Aro which is a trading style of Aro Finance Limited, who are a leading credit broker to offer our customers a different solution to borrowing money and finding a loan. We work alongside Aro so we can provide our customers with the right offer from a panel of handpicked trusted lenders. 

With one eligibility check, you can search a panel of carefully selected lenders and provide you with a loan tailored to your needs. Once you have been approved you receive your funds which could be as quick as the same day.

So sit back, relax and let us do the hard work.

Who are your lenders?

We have carefully selected a number of trusted lenders to be on a panel. You can search the panel to provide you with the very best offer you are eligible for. Find out more about each of our lenders here.

If you have any questions on our lenders, please call our Customer Service Team on 0333 555 0560 and a colleague will be happy to help.

How much can I borrow?

Lenders offer loans from £1,000 up to £25,000 with repayment periods ranging from 1 to 7 years.

Will applying affect my credit rating?

No. One of the best things about our service is you get access to a panel of trusted lenders with no credit footprint left on your credit file. When you apply with us, a soft search is completed which doesn’t harm your credit score.

However, if you do proceed with an offer from your search with us, the lender will complete a hard search once you have accepted your offer. This will show on your credit file.

About our trusted provider, Aro

Asda is in partnership with Aro which is a trading name of Aro Finance Limited. Both Asda Money and Aro are credit brokers, not lenders. We offer our customers a different solution to borrowing money and finding a loan.

We work alongside Aro so we can provide our customers with their very best loan offer from a panel of handpicked trusted lenders.

With one simple eligibility check, our panel of lenders can provide you with a loan tailored to your needs. It’s also a safe way to find a loan without negatively affecting your credit rating.

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