What is the difference between a secured loan and an unsecured loan?

In the state of California, secured and unsecured loans are two types of loan agreements that have different requirements. A secured loan is a loan that requires a borrower to provide collateral (a pledge or asset) as security for the loan. If the borrower fails to pay back the loan, the lender may have the right to repossess the collateral as long as certain terms and conditions in the loan agreement have been met. Common examples of secured loans are mortgages, auto loans, and small business loans. On the other hand, an unsecured loan does not require a borrower to pledge any collateral. Because the lender has no collateral to repossess, the lender usually charges higher interest rates for unsecured loans than for secured loans since the risk is greater. Common examples of unsecured loans are student loans, credit cards, and personal loans. Under California banking law, lenders must comply with requirements related to secured and unsecured loans including state and federal disclosure requirements, repayment terms, and other related regulations. Both secured and unsecured loans can have a positive impact on borrowers, however it is important to understand the differences between them in order to make an informed decision on the best loan option for your individual needs.

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What is the difference between a secured loan and an unsecured loan?

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