What is the difference between secured and unsecured loans in default?

For secured loans, the lender can directly seize and sell the collateral (equipment, real estate, inventory) to recover their loss — without necessarily suing you first. For unsecured loans, the lender must sue, obtain a judgment, and then attempt to collect from your business assets. If you personally guaranteed an unsecured loan, they can then come after your personal assets after obtaining a judgment.