When to use a secured vs unsecured facility

2 min read

Large & longSecured territory

Small & shortUnsecured territory

A simple ruleTo decide

A rule of thumb

The lower secured rate tempts everyone, but it is not always right. A workable rule: use secured borrowing for large, long-dated needs where the rate saving compounds and you can accept the slower set-up and the asset at stake; use unsecured for small, short, urgent needs where speed and keeping assets clear matter more than a marginal rate. See which costs less.

Why the rule works

Factor	Favours secured	Favours unsecured
Amount	Large	Small
Term	Long	Short
Urgency	Can wait	Needs speed
Rate gap in pounds	Meaningful	Small over a short term

Over a large sum and a long term, even a small rate difference is real money, so secured's lower rate earns its slower set-up. Over a small, short facility, the rate gap in pounds is thin, and unsecured's speed and safety win. The rule simply follows where the rate saving is worth the trade.

Don't forget the guarantee layer

Whichever you choose, check whether a personal guarantee is attached — it can add personal risk even to an unsecured facility. Genuinely company-only lending with no PG keeps your personal assets clear regardless. See no personal guarantee loans.

The Credicorp view

For small, short, urgent working-capital needs — where most short-term borrowing sits — Credicorp's unsecured lending with no personal guarantee usually beats pledging an asset for a marginal rate. For large, long-dated needs, weigh a secured deal. Compare our business loans or register to apply. Educational content, not financial advice.

Frequently asked questions

When should I use secured versus unsecured borrowing?

Use secured borrowing for large, long-dated needs where a lower rate compounds into real savings and you can accept the slower set-up and the asset at stake. Use unsecured for small, short, urgent needs where speed and keeping assets clear matter more than a marginal rate. Follow where the rate saving is worth the trade.

Why does the size and term decide it?

Because the rate saving from secured borrowing only matters when it is meaningful in pounds. Over a large sum and long term, even a small rate difference is real money that justifies the slower set-up. Over a small, short facility, the saving is thin, so unsecured's speed and safety usually win.

Does unsecured always mean no personal risk?

No. Many unsecured facilities still carry a personal guarantee, which exposes your own assets if the company cannot repay. Whichever route you choose, check for a guarantee — only company-only lending with no personal guarantee keeps your personal assets clear regardless of whether the facility is secured.