Secured loans are considered less risky to lenders primarily because they are backed by collateral—an asset that the borrower pledges to guarantee the loan. If the borrower defaults, the lender has the right to seize and sell the collateral to recover the loan amount, significantly reducing the lender's financial risk. This tangible asset acts as a safety net that lowers the chances of loss for the lender. Other reasons securing loans are less risky for lenders include:

• The presence of collateral allows lenders to offer lower interest rates than unsecured loans, reflecting the reduced risk.
• Lenders may have more flexible credit requirements because the collateral mitigates borrower credit risk.
• Secured loans typically have structured repayment plans and can involve larger sums due to the security offered by collateral.
• Lenders can be more lenient or willing to approve loans even for borrowers with lower credit scores or less robust financial histories.

These factors combine to make secured loans less risky from a lender's perspective compared to unsecured loans, which have no collateral protection and thus pose a higher risk of loss if the borrower defaults.