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For this post, we’ve teamed up with our partners at Fairstone

If you’re shopping around for loan options, you may be wondering what the difference is between a secured personal loan and an unsecured personal loan, and why you would choose one over the other. It’s a good question – and one that affects how much money you can borrow, how flexible your payment options are, and more. 

To help you decide if a secured personal loan is right for you, we’ve teamed up with our partners at Fairstone to bring you the top five reasons why people choose secured personal loans, plus an example of what payments might be for a typical secured personal loan. 

Before we jump in, let’s review the difference between a secured loan and an unsecured loan 

A secured personal loan is a loan that is backed by an asset, typically your home. Your lender puts a “lien” on your property, meaning that the lienholder can collect the value of the property if your loan goes unpaid. On the other hand, an unsecured personal loan is backed by a loan agreement, but not an asset. You don’t have to own your home to qualify for an unsecured loan. 

*Spoiler Alert* Securing your loan gives your lender greater confidence that you will pay back your loan as promised, which is why there are some benefits to choosing a secured loan. 

Top 5 Reasons Why People Choose Secured Personal Loans:

#1 – A lower interest rate

Because you’re choosing to secure your loan, lenders will be willing to offer some of their lowest interest rates on credit products. If you’re looking to pay less in interest charges, reducing your interest rate is a good start. A secured loan product will give you this flexibility.

#2 – Access to more money

In addition to a lower interest rate, choosing to secure your loan generally offers you greater borrowing power. There is usually a minimum borrowing amount for secured personal loans (for example, with Fairstone secured personal loans start at $5,000). If your borrowing needs meet this threshold – for example, if you’re facing large home repairs, appliance replacement, debt consolidation or other unexpected expenses – you’ll be able to consider a secured personal loan as one of your borrowing options. And, secured loans usually have a higher maximum borrowing amount as well. At Fairstone, you can borrow up to $35,000 with a secured loan compared to only $25,000 with an unsecured loan.

#3 – The option of a longer loan term

The loan term is how long you have to pay the loan back. With an installment loan product, payments are spaced out evenly over the loan term (usually you’ll have the option between bi-weekly, semi-monthly or monthly payments). Generally, lenders allow a longer loan term on secured personal loans, meaning you’ll be able to space out your payments over more time. This flexibility allows you to find a loan payment amount that fits your budget. With Fairstone, loan terms on secured personal loans can be anywhere from 36-120 months (3-10 years), whereas loan terms on unsecured personal loans are shorter, ranging from 6-60 months (6 months-5 years). 

#4 – Lower, more manageable loan payments

Because you have the option of a longer loan term, borrowers are able to spread out their loan payments over more time, reducing the payment amount. If you’re concerned about interest charges, you can opt to make bi-weekly payments, which shortens how much time interest has to accrue before you pay it off. You also may be able to make additional payments on your loan product to get ahead of interest and start reducing your balance quickly, and then fall back to your regular payment schedule as it suits you. Just make sure you ask your lender if there are any prepayment penalties on secured personal loans first.

#5 – Borrowers have a need for cash now, and want to consolidate debt

This last reason is a common loan scenario. Many borrowers have an urgent cash need (for example, they need money to cover a car or home repair), but they also have underlying financial issues that could use resolution, like unpaid bills. If you’re stuck in cycles of minimum payments and are facing a cash flow issue, you can resolve both with a secured personal loan. Because you have access to more money, you can get the money you need to cover your expense today, and have your outstanding bills paid off directly. Then, when you begin repaying your loan, you’re only dealing with one loan payment to one lender, and you’re starting fresh with your credit card, bills and any other credit products. Goodbye cycle of minimum payments, hello debt relief

Wondering what a secured personal loan from Fairstone might be like? Here’s a common loan example, with loan amount, interest rate, loan term and payments:

$10,000 loan at 19.99% interest on a 120-month loan term. Bi-weekly payments of $86.65. 

How does this payment compare to an unsecured loan? 

$10,000 loan at a 26.99% interest rate on a 60-month loan term. Bi-weekly payments of $140.50.2

Want To Know How Much Your Payments Will Be With A $10,000 Loan From Fairstone? 

You can get a no-obligation personalized loan estimate on their website without impacting your credit score. Click here to get a loan quote now. If you’re interested in getting a quote for a secured personal loan, let your Fairstone Lending Specialist know and they’ll be happy to provide an updated estimate. 

We hope this article gives you the information you need to determine which loan product suits you best. Whether you’re looking for a secured personal loan, with greater borrowing power and lower rates, or the speed and ease of an unsecured personal loan, we can help you find the loan product that’s right for you. 

2 Payments as low as $140.50 is based on a 60-month loan term at an annual interest rate of 26.99%. Important terms and conditions apply. On approved credit. Speak with one of our Lending Specialist or visit for more information.

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Fairstone Financial is a leading alternative lender in Canada, they have been helping Canadians since 1923. Their mission is to provide Canadians, with fair to good credit, with an affordable alternative to payday loans.

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