What's the difference between a secured and unsecured

2 min read

CollateralThe core difference

Risk vs costThe trade-off between them

UnsecuredCredicorp's stance

Secured loans

A secured loan is tied to collateral — property, equipment, vehicles or stock — which the lender can take and sell if the loan isn't repaid. Because the lender's risk is lower, secured loans can offer larger sums and sometimes lower rates. The cost is that the pledged asset is genuinely at risk, and arranging security adds time and valuation to the process.

Unsecured loans

An unsecured loan isn't backed by a named asset. The lender relies instead on the company's trading, cash flow and credit profile to judge the lending. That usually means a faster arrangement and no asset tied up — though, because the lender carries more risk, pricing can be higher and sums are sized to what cash flow comfortably supports. See do I need collateral for a business loan for how this works in practice.

How Credicorp lends

Credicorp's working-capital lending is unsecured and to the company, assessed on trading and cash flow, with no personal guarantee — so neither company nor personal assets are pledged. That suits short-term, flexible needs where speed and keeping assets free matter. Model the cost with the true cost of borrowing calculator, and weigh it against the alternatives before deciding.

Frequently asked questions

Which is cheaper, secured or unsecured?

Secured can carry lower rates because collateral reduces the lender's risk, but it ties up an asset and takes longer to arrange. Unsecured may price higher yet keeps your assets free and is usually faster. Compare total cost and terms, not just the headline rate.

Which should I choose?

It depends on the need. For a large, long-term investment, secured may suit; for short-term, flexible working capital where speed matters and you'd rather not pledge an asset, unsecured fits. The right choice follows the purpose and the amount.

Can I get a large amount unsecured?

Unsecured sums are sized to what your cash flow comfortably supports, so very large facilities are more often secured. For working-capital needs, unsecured lending frequently covers the amount required without pledging anything.