Explained: Secured vs. Unsecured Loans

Here at Bondora, we offer unsecured personal loans to our borrowers. And you may be wondering what an unsecured loan means. Keep watching to find out.

A secured loan is a loan backed by collateral. The most common types of secured loans are mortgages and car loans, and in these instances, the collateral is the home or car. With collateral, the applicant may get a lower rate on a personal loan or a higher loan amount, but at the risk of losing the asset if they fail to repay the loan.

An unsecured loan doesn’t require collateral, so the approval is based on the applicant’s credit. This could mean the borrower pays more interest than they would with a secured loan, but there is no risk of losing any collateral.

Bondora utilizes an internally developed credit scoring model to calculate the risk rating using all the data points we have on a potential borrower. You can learn more about how Bondora’s risk ratings are calculated here.

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Thanks for watching, keep investing, and see you again next time.

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