The fundamental difference: a secured loan is backed by an asset (collateral); an unsecured loan is backed only by your promise to repay. This single distinction affects everything — interest rates, loan amounts, approval requirements, and what happens if you default.
Secured loan examples: mortgages (secured by property), car loans (secured by the vehicle), gold loans (secured by gold). Unsecured examples: credit cards, personal loans, student loans. Secured loans typically offer 6-10% interest; unsecured loans charge 12-24%+ because the lender has no asset to recover.
If you default on a secured loan, the lender seizes and sells the collateral. Default on a mortgage? Foreclosure. Default on a car loan? Repossession. Default on an unsecured loan? The lender can sue, damage your credit score, and send collectors — but cannot take specific assets without a court order.