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What’s the difference between a secured and unsecured loan?

A secured loan is backed by collateral, which is something you own that will be seized if you default on the loan. Your home or car are the most common types of collateral, but really it can be any asset you own. On the other hand, an unsecured loan does not require collateral and approval is backed by your creditworthiness. Because there is more risk involved with unsecured loans, their rates are sometimes higher and have different restrictions.

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