Personal Loan or Secured Loan: Which One is Better?

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Various banks and financial institutions in the UAE offer multiple loan options to help people manage their dues and other finances. Whether you need to renovate your home, travel or pay for your child’s higher education, you can get easy loan approval for almost everything.

In fact, you may have already gone through some of the loan options, their interest rates and repayment options when in need of funds. But while exploring your options, did you ever check if you should apply for an unsecured or a secured loan? You may have not.

Most people do not even consider this as a topic for discussion. The reason behind this is the set of advantages both types of loans offer. You can simply choose the one that best fits you based on your financial preferences.

While both types of loans fulfil your financial needs, you must know which one is better and appropriate for you. Keep reading to learn more about both secured and unsecured loans, how they are different from each other, and how one can be better than another. Let us begin with knowing what they are.

What is an Unsecured (Personal) Loan?

Personal loans are not backed by any asset such as a vehicle or property, so they are also called unsecured loans. They are easy to obtain with a good credit Score. The banks in the UAE offer personal loans for both fixed and variable interest rates with a flexible repayment term. 

Personal loans offer higher interest rates, and failure in repayment can incur additional charges and pile up the dues for the borrower. Before applying for a personal loan, you must analyse your financial condition to make sure that you will be able to repay the same. In case you miss out on EMIs or do not repay your unsecured loan on time, you may end up spoiling your credit report.

Do You Know: How to Calculate Personal Loan Interest Rate in the UAE?

What is a Secured Loan?

Secured loans are the credit agreements supported by an asset, such as a property or a car that the applicant owns. By keeping these assets as a security, the banks decrease the amount of risk assumed as they take over the asset and recover the necessary payments if the borrower is unable to pay off the loan. Secured loans are also called second mortgages.

You might need a secured loan to cover your expenses for a new car, wedding, holiday, travel, home improvements and much more. Here are a few examples of secured loans.

  • A loan to buy a car of your choice
  • A loan to refurbish your home 
  • A loan to buy a house or flat 
  • A business loan against stock, machinery, building, raw materials and more

The banks offer a longer repayment term for secured loans in comparison to the unsecured ones. And longer repayment period leads to lower monthly EMIs. 

Personal Loan vs. Secured Loan

Here are a few factors that make a personal loan different from a secured loan. 

  • Credit Score: There are very few unsecured loan options for bad credit scores. Personal loans are provided to borrowers with good repayment history and a healthy credit report. However, secured loans can be provided to anyone with equity in their hands.
  • Repayment Term: Most personal loans repayment term in the UAE starts from 1 to 2 years. On the flip side, the secured loans are paid in monthly EMIs between 5 to 25 years.
  • Asset in Support: The borrowers need to provide an asset to back a secured loan. On the other hand, personal loans are unsecured loans with no assets in support.
  • Interest Rates: The interest rates for personal loans are comparatively higher than that of a secured loan. This is because the banks keep an asset against a secured loan and can take it over to settle the debts in case the borrower doesn’t repay the loan. However, that is not the case with personal loans. The borrowers do not provide any security against the same. As a result, the interest rates are higher.
  • Loan Settlement: Personal loans can be easily settled before the end of the repayment term without any additional charges. However, there may be some additional charges for settling a secured loan before the term completes.

Must Read: How Can a Personal Loan Affect My Mortgage Application?

Why Opt for a Personal Loan?

Here are the main reasons why you must take a personal loan.

  • Debt Consolidation: Personal loans help borrowers consolidate their debts in one place and then repay them easily in monthly EMIs. 
  • Meeting Expenses: The borrowers can use the personal loan amount to meet with different types of expenses such as wedding expenses, education expenses, medical expenses, etc.
  • Vehicle Financing: Auto finance loans are secured loans and keep your vehicle as collateral. So people prefer buying a vehicle with a personal loan amount. They are unsecured and you don’t need to worry about missing payments. Personal loans offer the flexibility of paying missed EMIs in the coming month but with an additional interest amount. 
  • Easy Disbursement: Personal loans come with an easy disbursement facility. The borrowers merely need to submit their loan application, and if their credit history looks good, they can get a personal loan credited to their bank account in just a few clicks. 

Why Opt for a Secured Loan?

Here are the major reasons why you must take a secured loan.

  • Available for Bad Credit: Secured loans are easily available for applicants with a bad credit rating. All the banks in the UAE need a secured asset in exchange for providing this type of loan.
  • Longer Repayment Duration: Secured loans offer longer repayment duration ranging between 1 to 25 years, which gives borrowers time to pay off the loan amount. 
  • Easy Monthly EMIs: Secured loans are mostly used by the borrowers to consolidate their debts and repay them all in easy monthly instalments.
  • Other Benefits: Secured loans can be used to meet different types of financial requirements, including significant purchases or home renovation.

The Bottom Line

People take a loan to fulfil their financial needs, and both these types of loans help accomplish this motive. The foremost benefit that you get if you apply for a secured loan is that you will get lower interest rates and a fixed repayment term. And if you apply for a personal loan, you can get flexible repayment terms, but the interest rates will be comparatively higher.

So it all depends upon your financial preferences. If you have no assets to provide and still need funds to pay your expenses, you can opt for a personal loan. On the other hand, if you are looking for a secured loan with an asset in hand, you can avail the same.


If you want to know your monthly EMI amount for a specific amount of personal or secured loan, you can use online loan calculators available on our website to evaluate the same. Even if you want to check your credit report, you can call us anytime and our financial experts will help you with the same. If you need to apply for a personal loan, our representatives will take you through the best unsecured loans for bad credit scores. Moreover, they will guide you through the process and help you submit a loan application for your preferred loan type if required.

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