How much cheaper is a secured loan than unsecured?

2 min read

Secured = lower rateLess lender risk

Gap variesBy profile and asset

Asset at stakeThe trade-off

Compare totalsBoth on total repayable

Why secured is cheaper

A secured loan gives the lender a charge over an asset it can recover on default, cutting its potential loss and therefore the risk margin. That is why secured lending — asset finance, mortgages, charge-backed facilities — typically carries a lower rate than an unsecured term loan for the same borrower. See how security affects price.

How big the gap is

The size of the discount is not fixed. For a strong, established company, the unsecured rate may already be low, so security saves less. For a newer or thinner-filed business, security can make a much larger difference — sometimes the difference between a keen rate and a costly one, or between an offer and a decline. The weaker the unsecured case, the more security is worth.

Weighing it up

The lower secured rate comes with the asset at stake if things go wrong. For an established, cash-generative business the trade can be worthwhile; for a more volatile one, the certainty of not risking an asset may justify paying the unsecured premium. Ask each lender to quote both, and compare on total repayable to see exactly what the security is worth. See also guarantee-free options.

Compare a secured and unsecured quote on the true cost calculator, then apply.

Frequently asked questions

Is a secured loan always cheaper than unsecured?

Usually, because the lender's risk is lower, but not by a fixed amount. A strong company may find the unsecured rate already competitive, so security saves little; a weaker profile can see a large difference. Ask lenders to quote both and compare on total repayable — sometimes the secured saving is well worth the asset at stake, and sometimes the unsecured premium is a price worth paying for certainty.

What can I use as security for a cheaper rate?

Commonly business assets — equipment, vehicles, property, or a debenture over the company's assets — and sometimes a personal guarantee, each of which reduces the lender's risk and can lower the rate. What is acceptable depends on the lender and the asset's value and recoverability. The stronger and more recoverable the security, the greater the rate benefit, but weigh that against what you are putting at risk.