What is the difference between a Secured and Unsecured Personal Loan?

A secured personal loan requires collateral, such as a home or car, to back the loan. If the borrower defaults, the lender can seize the collateral to recover the debt. An unsecured personal loan does not require collateral and is based solely on the borrower's creditworthiness. As a result, unsecured personal loans typically have higher interest rates as they pose a higher risk to the lender.