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Secured & Unsecured Loans

A secured loan is loan backed by collateral.
This means that the borrower pledges an asset (home, car, gold, etc) that may be sold by the lender should he be unable to repay the loan.

An unsecured loan is not backed by collateral and hence represents a greater risk to the lender.
That is why interest rates on unsecured loans are higher than those on secured loans.

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