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

In Washington, a secured loan and an unsecured loan are two types of loans that have a few key differences. With a secured loan, the borrower is required to provide collateral, such as a car or a home, as a guarantee for the lender. This means that if the borrower is unable to repay the loan, the lender can seize the collateral. An unsecured loan does not require collateral, but usually has a higher interest rate. The interest rate on a secured loan is typically lower because the lender knows the loan is backed by collateral that they can take possession of if the borrower fails to repay. In contrast, an unsecured loan has a higher interest rate because it is riskier for the lender. In Washington, secured loans are regulated by banking laws, which protect the borrower and the lender in the event of default. With an unsecured loan, the lender takes on the full risk of the loan, so there is no collateral to repossess if the borrower defaults. Overall, the main difference between a secured and an unsecured loan is the presence or lack of collateral. A secured loan is backed by an asset and has a lower interest rate, while an unsecured loan has a higher interest rate but does not require collateral.

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

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