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Why does an unsecured loan have a higher interest rate than a secured loan?

User Rkrauter
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2 Answers

3 votes

Answer:

Unsecured personal loans typically have higher interest rates than secured loans. That's because lenders often view unsecured loans as riskier. Without collateral, the lender may worry you're less likely to repay the loan as agreed. Higher risk for your lender generally means a higher rate for you.

Hope this helps :)

User PaolaG
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1 vote

Answer:

The bank bears all the risk of the loan.

Step-by-step explanation:

The bank doesn't have a guarentee that you will be true to your word. With secured loans they are guarenteed because they have collatoral if you back out.

User Chatar Singh
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