Classifying Types of Loans

Given to borrowers based on their financial resources or ability to repay the loan

Nothing "secures" the loan in other words

Lender does not have the rights to a specific asset if loan is not repaid

Examples: Personal Loan, Student Loans, and personal lines of credit

Usually needed when borrowing large amounts of money

Loan is "secured" with collateral.

In other words, if you default on the loan and your house was used as collateral- they would take the house

Have lower interest rates and longer repayment terms

Examples: Automobile loans, mortgages and home equity loans