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What a secured loan is
A secured loan is backed by something you own. You pledge an asset, the lender registers an interest in it, and if the loan goes unpaid the lender can take the asset to recover the money. That single change lowers the lender's risk, and the price falls with it. Everything else works like an ordinary loan on the personal loans market: a fixed amount, fixed payments, a set term, a rate capped at 35 percent APR.
For most personal borrowing the security is a vehicle or a cash deposit. Pledging home equity is a different product with different consequences, and it is covered on our home equity pages rather than here.
What you can pledge
- A vehicle you own outright. The most common security for a personal loan. The lender registers a lien, you keep driving it, and the title clears when the loan does.
- A cash deposit or GIC. The cheapest security and the safest. You cannot touch the money while the loan runs, but you cannot lose anything you did not already have set aside.
- Home equity. The lowest rates and the highest stakes, because the asset is where you live. A different product, arranged differently.
- Investments held at the lender. Some institutions lend against a portfolio you hold with them, at rates close to their best.
Secured and unsecured compared
| Secured | Unsecured | |
|---|---|---|
| Collateral | Required | None |
| Rate | Lower | Higher for the same borrower |
| Approval with weak credit | Easier | Harder |
| Amount available | Up to the asset's value | Set by income and credit |
| Speed | Slower, the asset is checked | Faster, often same day |
| Risk if you default | You lose the asset | Collections and your credit file |
What the security is worth
$10,000 over 48 months: secured against unsecured
| Route | Monthly payment | Months to clear | Total interest |
| Unsecured personal loan | $304.25 a month | 48 months | $4,604.02 interest (19.99%) |
| Secured against a vehicle | $263.29 a month | 48 months | $2,637.88 interest (11.99%) |
The security is worth the difference between those totals, and the risk is the asset itself, so the question is whether that difference is worth putting the vehicle behind it.
Illustrative example, not quoted offers: $10,000 over 48 months at the rates shown. Your rate depends on your credit, the asset and the lender.
To price your own amount, the personal loan calculator runs any rate and term.
When security is worth it
Pledge an asset to get a rate you could not get otherwise, not to get a loan faster or larger than you need. If your credit already earns a good unsecured rate, the security buys you little and costs you the asset's freedom. If your credit is fair or poor, the same asset can move you out of the twenties and into the low teens, which on a multi-year loan is real money.
Two situations argue against it. If the asset is one you cannot replace, like the vehicle that gets you to work, ask whether the rate saving is worth that exposure. And if the amount is small, the paperwork and the lien registration are rarely worth the difference.
What happens if you cannot repay
The lender pursues the asset. On a vehicle that means repossession, usually after a series of missed payments and notices, with the rules and timelines set provincially. The sale proceeds go against the debt, and if they fall short you still owe the difference. A default also lands on your credit file the same way an unsecured default would, so the asset is an addition to the consequences, not a substitute for them.
Call the lender before a payment fails rather than after. A rescheduled payment is a conversation; a repossession is a process that is hard to stop once it starts.
| Lender | Amount | Rate | Speed | |
|---|---|---|---|---|
| MDG Financial | $3,200 to $20,000 | 19.8 to 34.99% APR | within 24 hours | See if you qualify |
| Spring Financial | $500 to $35,000 | 9.99% APR | about 2 business days | See if you qualify |
| Loan Away | $1,000 to $5,000 | 19.9 to 34.5% APR | within 24 hours | See if you qualify |
| easyfinancial | $500 to $20,000 | 9.99 to 34.99% APR | about 2 business days | See if you qualify |
| Money Mart | $500 to $25,000 | 34.56 to 34.95% APR | about 2 business days | See if you qualify |
The secured loans page lists lenders and what each will accept as security.
Frequently asked questions
Is a secured loan easier to get than an unsecured one?
Usually, yes. The asset covers the lender's risk, so a file that would be declined unsecured is often approved secured, and at a lower rate. The approval is easier; the consequence of defaulting is heavier.
What can I use as collateral for a personal loan in Canada?
Most commonly a vehicle you own outright or a cash deposit held with the lender. Some lenders accept investments held with them. Home equity is possible but is a separate product arranged against your property.
Can I lose my car with a secured loan?
Yes, if you default. The lender can repossess and sell it, apply the proceeds to the debt, and pursue you for any shortfall. That is the trade you make for the lower rate, so borrow an amount whose payment you can carry.
Sources
- Canada Gazette, SOR/2024-114, for the 35 percent criminal interest rate cap.
Related reading: personal loan vs line of credit and how to get a personal loan with bad credit.
Written by:
The Smarter Loans Editorial Team produces in-depth, original content to help Canadians navigate borrowing, credit, and personal finance with confidence.
