From the point of view of the lender, the riskiest type of loan is one that is unsecured: the borrower merely promises to repay it. A personal credit card is an unsecured loan, and it generally bears a higher interest rate than is charged for a secured note. Lenders would rather tie their loans to an interest in something tangible, a secured note. For example, if you purchase an automobile, the lender technically owns the vehicle until the loan is paid off; in the event of a default, the lender has the right to repossess the car and sell it off to regain some or all of the money it has loaned.
For commercial loans, banks or other lenders might require that an individual or a company pledge or sign over title to assets to protect their interest in a loan. For example, a company could offer as collateral that portion of any real estate not encumbered by a mortgage, or it could pledge equipment, accounts receivable, and other things of value. An individual could pledge personal real estate, cash investments, and life insurance cash value or death benefits.
For some personal loans, the lender may ask for another party to sign the note. An endorser is someone who agrees to pay the loan if the borrower defaults. A comaker is similar, with the distinction that the lender can collect from either the maker or the comaker. A guarantor is a third party who guarantees to repay the outstanding balance of a note if the maker defaults; the guarantor could be an officer of the corporation or company. In some situations, a government or private program may agree to guarantee the loan to assist a small business in obtaining financing.