Which type of loan typically requires collateral or a cosigner?

Secured loans are types of borrowing arrangements that require the borrower to provide collateral to the lender as security for the loan. This collateral can be an asset such as a car, real estate, or savings accounts. If the borrower fails to repay the loan, the lender has the right to take possession of the collateral to recover the outstanding debt. This reduces the risk for lenders, which often results in lower interest rates compared to loans that do not require collateral.

In contrast, unsecured loans do not require collateral, meaning they are based solely on the borrower's creditworthiness and ability to repay. While subprime loans may involve higher interest rates due to a borrower's lower credit scores, they are also typically unsecured. Personal loans can be either secured or unsecured, but many personal loans do not require collateral. The defining characteristic of secured loans is the need for collateral, making them distinctly different from the other types mentioned.