I think many of the posts of the secured v. unsecured loan are misguided. Even if the loan is "secured" (i.e., traditional auto loan), the lender can still sue you for money (at least in most states they can). For example, they can repossess the car, sell it (usually at a very low price), and then sue you. The question for a lender is will it make sense to file a lawsuit to collect whatever is owed after the collateral is sold and obviously that depends on the amount and likelihood of collecting a judgement.
The secured lender will be better off in a bankruptcy scenario, but the whole point of the unsecured loan program is to select VERY high credit borrowers who almost certainly will never file bk. Pretty easy for a bank to underwrite that minimal risk.
I think an unsecured loan to high credit individuals makes sense for a lender and borrower in most cases (assuming financial terms are equal). The lender doesn't need to deal with the collateral/car (some states might require them to REPO first which costs money and the lender doesn't need to track insurance, etc.saving administrative costs). Collection will be a relatively easy matter - simple lawsuit for an unsecured note. At the same time, the borrower doesn't need to deal with a lender on title issues, can sell the car at any time Obviously, the Borrower will be sued if they don't pay, but most people with strong credit presumably assume they will repay the loan (as well as their other debts). Only downside for the borrower (assuming interest rate is equal) would POSSIBLY be a ding to your credit score and/or inability to borrow more money in the future.
