Secured Credit

Secured credit involves the use of collateral, which serves as security for the lender in case the borrower fails to repay the debt. Collateral can be assets like a home or a car. With secured credit, lenders are more willing to extend credit since they have a way to recoup their losses if the borrower defaults. Common examples of secured credit include mortgages and auto loans.

Unsecured Credit

Unsecured credit doesn't require any collateral. Instead, it's granted solely based on the borrower's creditworthiness. Since there's no collateral involved, unsecured credit often comes with higher interest rates compared to secured credit. However, it provides more flexibility to borrowers. Credit cards and personal loans are typical forms of unsecured credit where lenders rely on the borrower's credit history and income to determine eligibility and terms.