Published Date: 1st October, 2025
Modified Date: 2nd February, 2026
Author: Murray Greig
Key Takeaway
Secured loans use an asset as collateral and often suit borrowers with lower credit scores, offering lower interest rates and higher borrowing limits. Unsecured loans don’t require collateral but usually need a stronger credit score and come with higher interest rates.
Secured vs Unsecured Loans: What’s the Difference?
When comparing secured vs unsecured loans, the key difference is whether an asset is used to support the loan — and how that affects approval criteria, interest rates, and credit score requirements in New Zealand.
At Loansmart, both loan types are used to help borrowers with different financial situations, including those with limited or imperfect credit histories.
Secured Loans
A secured loan is backed by an asset you own, such as a vehicle or property. This asset acts as security for the lender and reduces the overall lending risk.
Because the loan is supported by collateral, secured loans can often be an option for borrowers with low or average credit scores, provided they have a suitable asset and can afford the repayments.
Key characteristics of secured loans:
An asset is used as security
Lower interest rates compared to unsecured loans
Higher borrowing limits may be available
Credit score requirements are typically more flexible
The lender may recover the asset if repayments aren’t met
Common uses: debt consolidation, larger purchases, refinancing, or borrowing when credit history is limited.
Examples of common secured loans:
- Home loans
- Secured car loans
- Secured personal loans
Unsecured Loans
An unsecured loan does not require any asset as security. Approval is based mainly on your credit score, income, and overall financial position.
Because there’s no collateral backing the loan, unsecured loans usually require a stronger credit profile and come with higher interest rates to reflect the increased risk.
Key characteristics of unsecured loans:
No asset required as security
Faster application and approval process
Higher interest rates than secured loans
Lower borrowing limits
Typically requires a good to strong credit score
Common uses: short-term expenses, smaller loan amounts, or borrowing without risking assets.
Examples of common unsecured loans:
- Credit cards
- Unsecured personal loans
- Small cash loans
Pros and Cons of Secured Loans
Pros
- Lower Interest Rates: Because lenders have your asset as a backup, they usually offer better interest rates. That means you’ll likely pay less over time.
- Bigger Borrowing Amounts: Need a larger loan? Secured loans let you borrow more (up to $150,000 with Loansmart), which is great for things like home renovations or buying a vehicle.
- Longer Repayment Terms: You can often spread out repayments over a longer period, making monthly payments more manageable.
- Higher Approval Rates: Even if your credit score isn’t amazing, using an asset can boost your chances of getting approved.
Cons
- You Could Lose Your Asset: This is the big one. If something happens and you can’t keep up with repayments, you risk losing the item you’ve secured the loan with—like your car or house.
- Longer Approval Times: Secured loans can take a bit more time to process since the lender has to value the asset and do some extra checks.
Pros and Cons of Unsecured Loans
Pros
- No Asset Required: You don’t have to put anything on the line, which takes a bit of the pressure off.
- Faster Process: Unsecured loans are usually quicker to apply for and get approved—especially with lenders like Loansmart that focus on fast approvals and same-day payouts*.
- Flexible Use: You can use an unsecured loan for anything—travel, bills, debt consolidation, or emergencies.
Cons
- Higher Interest Rates: Since there’s no security for the lender, you might face slightly higher interest rates compared to a secured loan.
- Lower Borrowing Limits: Because the risk is higher, you won’t usually be able to borrow as much as you would with a secured loan.
- Credit Score Matters More: Approval and interest rates rely heavily on your credit score and financial history.
So, Which One Is Right for You?
| Your Situation | Best Option |
|---|---|
|
Need a large loan
|
Secured Loan
|
|
Don’t have assets to secure a loan |
Unsecured Loan |
|
Want lower interest rates
|
Secured Loan
|
|
Need cash fast |
Unsecured Loan
|
|
Have a solid credit score
|
Unsecured Loan
|
|
Need a longer-term repayment plan
|
Secured Loan
|
Which Loan Type Is Right for You?
A secured loan may be suitable if you:
Have a low or average credit score
Own a vehicle or property you can use as security
Need to borrow a larger amount
Want lower interest rates
An unsecured loan may be suitable if you:
Have a strong credit score
Want a faster approval process
Prefer not to use an asset as security
Only need a smaller loan amount
Choosing between a secured and unsecured loan depends on your financial situation, credit profile, and borrowing goals — not just interest rates.
At Loansmart, we offer both secured and unsecured loans with flexible options to suit your needs. Whether you’re borrowing a little or a lot, we can help find a smart loan option with repayments that work for you.
Why Choose Loansmart?
We’re not just here to hand you a loan and disappear. We offer a smarter way to borrow:
- Apply online in just 2 minutes
- Get approved in as little as 1-2 hours*
- Same-day payment available*
- Borrow up to $75,000 unsecured* or up to $150,000 secured*
- Flexible repayment terms from 6 to 84 months
We also don’t make you jump through hoops. No tiresome paperwork. No scanning documents. Just a fast, easy, 100% online process.
If your credit isn’t perfect, don’t stress—we may still be able to help. Our expert team works with a network of trusted, low-cost lenders to find the best loan option for your situation.
Ready to get started? Apply online now or chat with our friendly team.
*Subject to responsible lending checks and criteria.
FAQ's
Not really – especially if you have something of value to use as security, like a car or home. At Loansmart, we’ve got high approval rates and can help you find the best deal based on your situation.
The exact requirements to get a secured loan can vary depending on the lender, but generally you need to have an asset to use as security (like a car or property), and a steady income.
Yes, a credit check is part of our process as a responsible lender. This applies to unsecured loans, too. But don’t panic – even if your credit isn’t perfect, you might still qualify. At Loansmart, we work with a bunch of lenders, which gives you more options and better chances of approval.
It can take a bit longer than an unsecured loan because there are a few more steps in the process, but it’s still pretty quick! It may even be the same day you apply if you contact us early enough in the day. It all depends on how much you want to borrow and what type of asset you’re using as security.
Yep! That’s the beauty of unsecured loans. You can use the money for travel, car repairs, debt consolidation, home upgrades, weddings – whatever you need. There are no strings attached to how you spend it.
Our unsecured loans start from 9.95%* – which is super competitive. The exact rate you get will depend on a few things like your credit history, income, and how much you want to borrow. But don’t worry – we’ll shop around to get you the best deal possible from our network of low-cost lenders.
