Is a payday loan secured or unsecured?

Quick Answer A payday loan is typically an unsecured loan. This means you don't need to provide collateral, like a car or house, to obtain the loan. Instead, the lender evaluates your income and creditworthiness to determine if you qualify for the loan.

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Kevin Johnson Answer updated on Jul 4, 2023

Fact checked by Doreen Dumesle

A payday loan is an unsecured loan, which means you don't need to provide any type of collateral to get the loan.

Examples of a secured loan would be a car title loan, which uses your car title as collateral, or a HELOC (home equity line of credit), which uses your home as collateral — both allowing you to borrow money against the value of the asset.

However, for an unsecured loan, most lenders simply evaluate your income and creditworthiness to determine if you qualify — no assets required.

Learn: Can you get a payday loan without a job?

Since there isn't any property "backing" an unsecured loan, lenders consider them to be riskier. For that reason, the interest rate for an unsecured loan will typically be a great deal higher than the rate you'd see with a secured loan.[1]

Another thing that heightens the risk and, subsequently, the cost of payday loans is that payday loan lenders don't look at your creditworthiness — making them a bit different than your standard unsecured loan. Instead, lenders simply want to see proof of your income to decide how much they will let you borrow and to assess your ability to repay.

Because payday loans require no credit check and are unsecured, their cost can be extremely high — with APRs often around 400%.[2]

Payday loans also have considerably shorter repayment periods compared to other unsecured loans, usually requiring full repayment by your next payday or within two weeks.

Learn: Are payday loans safe?

While you don't have any risk of losing your car or other valuables as you would with a secured loan, know that the high interest rates of payday loans can be extremely risky.

I would suggest looking into other personal loans that are easier to repay, so you don't get stuck with high interest or fees that make your loan hard to pay down.

  1. Secured Debt vs. Unsecured Debt: What’s the Difference? ↩︎

  2. What is a payday loan? ↩︎

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