A secured loan is a loan that is backed by collateral, such as a car or house. An unsecured loan is not backed by collateral. The interest rate on a secured loan is usually lower than the interest rate on an unsecured loan because the lender has less risk. If the borrower defaults on the loan, the lender can take possession of the collateral and sell it to recover their money. This reduces the risk for the lender and allows them to offer a lower interest rate. A high interest rate is not a feature that makes a secured loan less costly than an unsecured loan.
For example, if you are buying a car and you take out a secured car loan, the lender will use the car as collateral. If you default on the loan, the lender can repossess the car and sell it to recover their money. Because the lender has less risk, they can offer you a lower interest rate than if you took out an unsecured personal loan.
