Anytime when you borrow some cash from the bank, or borrow it from a friend, what you are basically doing is to take out a loan. A loan is basically an amount of cash that has been borrowed from a bank, the financial institution or an individual for a certain period of time which requires to be repaid together with some interest. Nowadays, approaching a money lender in Singapore is being considered as the best approach to avail finance when one needs cash for purposes such as education, buying a car, house construction, or some other business requirements.

A money lender in Singapore might permit you to borrow money from them with just your promise to re pay back the cash and nothing else beyond that. Alternatively, your lender might require you to have an asset which is going to act as a security for that loan. This primary distinction is basically the difference between the secured & the unsecured loans. This brings us to the two different loan types, that is, the secured loan & the unsecured loan.

Secured loans, what are they?

Secured loans are the kind of loans that have some backing by certain assets such a house when you apply for mortgage loans or a car when you apply for auto loans. This asset is termed as the collateral for that loan. After agreeing to your loan, you commit yourself to the lender that they can repossess what you used as collateral in case you fail to repay your loan as you had agreed.

Despite the fact that lenders repossess your property for the defaulted secured loans, one might still remain in debt for the loan in case they default. After the lenders have repossessed the property, they are going to sell that property where they use that cash in clearing off your loan. In case the property fails to sell for the adequate cash to fully cover your loan, you will still have to pay off the difference.

For secured loans, the debt amount that is sanctioned by the lender is determined by the collateral. The interest rates for secured loans are often low due to the fact these loans are protected by the asset. An example of the secured loan is the mortgage loan.

Unsecured loans, what are they?

The principle above is not true for the unsecured loans. The unsecured loans aren’t tied to your assets in any way which implies that your lender cannot by any means seize your property in order to pay for your loan. Examples of unsecured loans include personal loan, payday loan, credit card as well as student loans since these kinds of loans aren’t tied to your assets in a manner that your lender can take your assets in case you default on the loan payments.

What you basically require is to possess an excellent credit history as well as a solid income so that you can be approved to receive the unsecured loan. The amounts of loan might be smaller due to the fact your lender does not possess any collateral they can seize in case you default on the loan.

The risk for this kind of loans is very high since your property doesn’t support your loan. Your loan amount is approved based on the creditworthiness, ability to pay, character and the financial status of a borrower. This is similarly used as a criterion for calculating the interest rate. In order to receive such loans, borrowers must have high credit ratings.

Credit reporting for secured & unsecured loans

The lenders can and they actually report the history of payment for both loan types to the relevant authorities like the Credit Bureaus Singapore. The late payments as well as defaults with the two loan types can actually be listed on the credit report. For the secured loans, lenders might use foreclosure or repossession in order to take that asset which is tied to your loan. This may lead to some extra negative entries indicated on the credit report.

Why you should settle for the secured loan

With the fact that your property is at risk of being seized in case you fail to repay your loan, you might be wondering why one would opt for the secured loan. People in most cases opt for the secured loans due to the fact that their credit history does not permit them to get approval for unsecured loans. Since the secured loans have some asset backing, lenders are at lower risk when they extend the loan to you.

In a similar way, secured loans permit borrowers to receive approval for even higher limits of loan. Despite the fact that you are qualified for a higher loan, you must be cautious to select a loan which you can actually afford. When settling for the secured loans, ensure that you have paid attention to the rates of interest, the period of repayment, and the amount that you should pay monthly.

For some loans such as mortgage or car loans, the lender will not accept to approve the application unless you allow them to possess the property in case you default on your loan. Some loans are actually secured by default –examples of these loans include title loans & pawn loans.


By now the difference between the two types of loans should be clear. The two types of loans are good each in their own means. For the secured loans, a guarantee is present, which in case the borrower fails to pay back the loan, the lender is able to recover the cash by simply selling the asset which was used as collateral and this is the reason why these loans’ term is long. Besides, the borrower must pay the cash within the agreed time. Failure to do so, the lender is going to exercise a lien on the borrower’s asset. For the unsecured loan, they pose higher risks and this is the reason as to why the full credit history is required. You should note that this kind of loan is only given to individuals who possess a high credit score. This loan is just allowed for a very short period, despite carrying high rates of interest.