Secured vs. Unsecured Loans

If you're considering applying for a loan or line of credit to help with a major purchase, you have a choice between secured and unsecured lending options. Secured loans and lines of credit are secured against your assets, resulting in higher borrowing amount and lower interest rates. Unsecured loans allow for faster approvals since collateral is not required.

When to consider unsecured loans and lines of credit

The main advantage of an unsecured loan is faster approvals and less paperwork. Unsecured loans are generally harder to obtain because a better credit score is required, since your loan would not be secured by any assets or collateral.

While unsecured loans might be obtained more quickly, it's important to remember you'll likely pay a higher interest rate. The four most common reasons why clients choose unsecured loans are for buying a car, home renovations, medical bills and education costs, and debt consolidation.

• Car loans take less time to process than a secured loan, and interest rates are very competitive

• Taking out an unsecured personal loan for home renovation projects is ideal, because you can access funds quickly to complete projects with predictable costs

• For ongoing expenses such as paying tuition or covering the cost of medical bills, you may be interested in an unsecured personal line of credit

• If you have outstanding debts, consolidating them with a personal loan can help. With interest rates that are lower than credit cards, this solution can help you manage your monthly payments.
   

When to consider secured loans and lines of credit

The primary advantage of a secured loan or line of credit is that you can generally gain access to more money, because you're backed by the security of your assets.

Since secured lending products require collateral, the approval process can be longer as the collateral must be processed and verified. This initial due diligence can be worth the extra effort since you'll benefit from lower interest rates. Large home renovations and debt consolidation are two instances in which you may elect to use a secured loan or line of credit.

Unlike smaller renovations, you may want to go through the process of obtaining a secured lending product when you're looking at more extensive changes to your home. A secured line of credit would give you access to a larger credit limit with a lower interest rate, that you could access on an ongoing basis for large projects.

If you have outstanding debts, a personal loan secured by your current assets (like property or a line of credit) can help you consolidate debts into one loan. With lower interest rates than most credit cards, a personal loan can help you manage your monthly payments. A secured line of credit also offers convenient access to low-interest funds to help consolidate and pay down existing debts.
 

Apply for a loan or line of credit with CIBC

No matter what your borrowing needs are, CIBC has secured and unsecured loans and lines of credit that can help you meet your financial obligations. You can apply for a loan or line of credit online, or speak with a CIBC advisor at 1-866-525-8622 if you have questions, or would like to learn more about possible lending options.