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Christine Tait

Last updated: 10/2019

Find the Best Personal Loan for Your Needs

If you’re thinking of obtaining finance to help you cover an expense, you’ve probably done your own research into personal loans. Personal loans are considered one of the original lending vehicles provided by banks in the United States. Consumers use personal loans for a variety of reasons.

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Overview

Secured Personal Loans

Personal loans are slightly more complicated than they appear. There are multiple different types of personal loans. And while their overall characteristics are the same, there are some subtle differences that make a huge difference. It’s important to be aware of these differences if you want to be a responsible borrower. You should make sure to explore all types of personal loans in-depth before you make any decisions regarding what type of finance you will be seeking.

This guide is a comprehensive source of information on secured personal loans. It provides you with all the information you need to know how to determine if secured personal loans are right for you. Make sure that you take in all the information provided in this article. You don’t want to go into any lending process without being fully aware of the benefits and risks of a particular financial product.

Why People Get Secured Personal Loans

As you can see above, securing a loan is much riskier than obtaining an unsecured loan. So, why do people do it? There are several reasons that people decide to secure their loans. Despite the risks, there are substantial benefits that will truly payoff if you approach the borrowing process responsibly. Below are a few different reasons that people decide to apply for secured personal loans.

Lower Interest Rates

The primary advantage to securing a loan is the fact that your interest rate is much lower. You won’t have to deal with high interest rates that impact your ability to pay back the loan. If you’re trying to reduce the overall cost burden you have when borrowing money, securing a loan is one of the easiest ways to get the interest rate you’re looking for. Many secured loans will have interest rates that are half the amount of other types of loans.

Easier to Obtain

For obvious reasons, secured loans are much easier to obtain. Lenders know that they have the ability to claim back money that they might lose – there is much less risk involved for them. It means that you are more likely to be able to get a loan even if you have a poor credit history. Many people that typically can’t get finance due to credit problems will choose this poor credit personal loan option.

Large Lending Amounts

For those who want to borrow large amounts of money, using an asset to secure a personal loan is typically the best option. Lenders are much more likely to give you large loans if you can prove that you have collateral to pay off any debt that you might end up accruing. Make sure to talk to your lender about how much they’re willing to lend you if you’re able to secure your loan – it might be more than you think.

What Asset Should I Use to Secure My Loan?

If you do decide to get a secured loan, you’re probably wondering what you should use to secure it. You don’t want to end up using the wrong asset to secure your loan, you want to leave yourself exposed to as little risk as possible. This is especially true if you have family that rely on your ability to provide financially.

Ask your lender what you can use to secure the loan that you’re getting. Hopefully they will have a variety of different assets that can be used. As a rule of thumb, you should be aiming to use the asset that has least impact on your life. For example, if you can, try to avoid using a car or home to secure your loan. This is the quickest way to make sure that you family isn’t hugely impacted by a default on a secured loan.

Ask your lender if they have alternative methods for securing loans. Perhaps they will let you use stocks or some other form of asset that wouldn’t disrupt your life to the same degree as a home or car seizure. Keep your family in mind when determining what to secure your loan with.

What Exactly Happens If I Default?

Many people wonder what actually happens if they end up defaulting on a loan that they have secured. The process will depend on the lender, as each will have different protocols for different situations. Typically, the lender will give you some time to try and get together the money that you owe. If you still haven’t been able to do so, they will seize the asset that you had used to secure the loan. In this case, proceedings will occur in a similar way to a foreclosure.

For example, if you secured the loan using your home. The lender would likely seize the home and auction it off. They would then recuperate the money that you owed them, along with any extra fees or penalties, and then give you the rest of the money that is left over (if there is money left over). In this regard, you don’t lose the full value of your asset unless your asset is only valued at the same amount as the money that you’ve borrowed.

Drawbacks of Secured Personal Loans

While you can see there are many benefits to getting secured personal loans, there are still some pretty serious drawbacks. In fact, many people steer clear of secured personal loans because of these disadvantages:

  • Risky – At the end of the day, secured personal loans are risky because you have to put up an asset to use as collateral. You’re potentially putting your family’s financial health at risk to get financing. This is why you need to be certain you can pay back the loan if you end up securing it.
  • Fees Often High – Another disadvantage is that many lenders often still have high fees, which means that you don’t get as cheap of financing as you might think. Don’t be fooled by a low interest rate, you should always make sure to check if there are hidden fees that might impact you as well!

Alternatives

If you want to get a personal loan, but you don’t think you’ll be able to get unsecured bad credit loans. There are still some options available to you to help you get financing if you don’t want to get a secured loan. One of these options is obtaining a co-signer. A co-signer is someone who guarantees the loan for you. Most people use family members as co-signers.

If you default on your loan, or you miss a payment, your co-signer will be financially responsible for it. They are in affect putting their name on the loan as much as you are – except they don’t get any benefit. This method is often used by people to get lower rates on mortgages and other forms of finance. The problem is that you can end up destroying someone else’s finances and credit score. For this reason, you need to be extremely confident that you will be able to meet your financial commitments.

Having a co-signer is a solid way to get a lender to give you the money that you’re looking for. The only downside is that it puts potential blame on third-parties. Getting a secured loan is much better for those who don’t want to put others at risk. Secured loans will allow you to take full responsibility for your financial decisions.

Who Offers Secured Personal Loans?

If you’re looking to get a secured personal loan, you have a variety of options at your fingertips. The place you opt to get your personal loan from will depend on your preferences. We will explore your two main options in further detail below. Make sure to consider what you’re looking for from a lender before you decide who to go with.

Brick-and-Mortar Lender

This is the original form of lender – this is mainly made up of banks and other lenders that have a physical presence. You can go into their branches and have a meeting with a lending specialist. People who want to have an in-depth discussion regarding their loan are most likely best to go with this option. While it is becoming more and more uncommon to use these lenders, many people still prefer working with their lender directly. These types of lenders also tend to offer more options when it comes to securing loans.

Online Lenders

Online lenders have been busy disrupting the market. There are hundreds of online lenders available for you to choose from. The application process is extremely simple and takes much less time than with traditional lenders. You’ll have to make sure that the online lender you choose offers secured personal loans, some will only offer unsecured personal loans. The main advantage of using an online lender is that you have many more options. There are so many small online lenders working in the industry at the moment – you can shop around for different rates and choose a lender that’s perfect for your situation.

What to Avoid When Searching for Secured Personal Loans

If you’re new to the lending industry, it’s important that you learn how to avoid working with certain companies that might not have your best interests at heart. If you’re planning on getting a secured loan, it’s very important that you make sure to be an aware borrower.

You should always make sure to look up lenders that you are thinking of working with on various consumer watchdog groups. These are the best sources for helping people determine if a lender is worth working with. You don’t want to work with a lender that has a sub-par reputation in the industry. Customer experience is a much more valuable component of the lending process than you might think. Working with a horrible lender can end up having profound effects on your mental health.

Another thing to look out for is predatory lenders. Because you’re securing your loan, you shouldn’t be paying a large amount of interest. Securing a loan typically results in you having extremely low interest payments. So, make sure to look out for companies that still want to charge you high interest rates if you’re going to secure the loan. These companies will try and lure you in with the promise of quick and easy capital, but this is a big red flag. If you end up having to pay high interest rates on money you’ve borrowed in a secured loan, you could end up defaulting and losing the asset that you’ve secured the loan with.

Verdict

After reading this article, you can probably tell there are both advantages and drawbacks associated with securing a loan. It’s important that you weigh these various components up before you make any decision on the type of loan you get. Making the right financial decisions is the best way to ensure financial success in the future. And the best way to make the right decisions is to ensure that you’re constantly informed.

Choosing a lender to work with can often be the most difficult part of the process. There are hundreds of online and brick-and-mortar lenders operating in the personal loans space, it can be difficult to determine who is best. We’ve provided our readers with a list of the best secured personal loans companies available in the United States. Head to our homepage if you’d like to see who we recommend. We provide non-biased referrals to help our readers get a head start in the lending process.

Never sign up for the first loan you look at, you should always compare interest rates before applying. Remember, each time you apply for finance, your credit score will take a hit. That’s why it’s important to make sure that you choose a solid lender before you apply. You don’t want to make multiple applications over a short period of time.

FAQ

Secured Loans versus Unsecured Loans

When considering a loan, it is essential to understand the different types of loans, their requirements, interest rates, and payment terms to apply for the loan that will best meet your needs.

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What is a secured loan versus an unsecured loan?

A secured loan is backed by some type of collateral and typically are car loans and mortgages. An unsecured loan is not supported by any collateral. If you were unable to make payments, the lender could not automatically take your property. Typical unsecured loans are credit cards or an unsecured line of credit.

What does a secured loan mean?
A secured loan requires collateral in order to take out the loan. Using the example of a car loan, if for some reason you default on the payment and terms, the lender can repossess the vehicle.
Are personal loans secured or unsecured?
Most personal loans are considered unsecured loans. Due to the lack of collateral requirement, they depend on the integrity of the borrower for repayment of interest and principal.
How does a secured personal loan work?
A secured personal loan would require that you provide an asset to secure the loan.  This could be your vehicle but is typically your private property. It is essential to view the terms, as you may get a lower interest rate, but should you default on the loan the asset you used as collateral can be impacted.
Do I want a secure or unsecured loan?
This would depend on if you are looking for a lower rate and have collateral to apply to the loan and or okay with the risks should you default.  If you do not have collateral and are okay with the higher rate, then the secured loan may be the best option for you.
Is getting a secured loan a good idea?
It depends on your current financial situation and comfort level with the collateral required for a secured personal loan. If you need the loan to address an immediate need and put together a payment plan to ensure timely payments this may be a good option.
Is a credit card a secured or unsecured loan?
A credit card is considered unsecured as you are not putting down any collateral. Being approved for the credit card and credit limit is based on your credit history and debt-to-consolidation ratio.
What is a shared secured personal loan?
A shared secured loan uses collateral and at times offer a lower rate. Types of collateral include savings account, share account or money market. This could be referred to as a savings secured loan.
Are secured loans easier to get?

Yes. Secured loans are easier to get since they have collateral to back the loan and therefore less of a risk to the lender. As a borrower of a secured loan, you can usually expect a lower interest rate. Otherwise there are bad credit loans with much higher interest.

Can I get a secure a personal loan for someone?
Yes, you can offer to take the loan out for a relative or friend, but you need to evaluate the risk and if a collateral secured loan is the best option.
How do I choose between a secured or an unsecured loan?
This depends on if you have collateral to apply to a secured loan and the risk you wish to take with that collateral. Other factors may include your credit history, employment, and income that may only allow for an unsecured option.
What happens if I default on a secured personal loan?
A secured personal loan requires collateral such as a vehicle, or equity in your home. If you default on a claim, repossession of personal property used as collateral may be at risk.
Is a personal loan the same as a secured loan?

A personal loan can be either secured or unsecured.  Secure in that it is secured by collateral or unsecured, based on our credit history and debt to ratio equity. Secured loans are about as close as you can get to bad credit personal loans guaranteed approval.

Collateral and Secured Personal Loans

Collateral is an essential requirement for a secured personal loan.  The most common types of collateral are home equity or a vehicle, however, depending on the institution, other collateral may be accepted such as personal savings, fine art, and investments.

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Can I secure a loan without collateral?
Yes, this would be considered an unsecured loan.  Factors that lenders consider when offering an unsecured loan is creditworthiness and debt-to-income ratio.
Can I use my car as collateral for a secured personal loan?
Yes.  For secure lines, types of collateral accepted typically include auto and equity in your home.  However, depending on the institution, other types of collateral may be accepted.
What can be used as security or collateral for a personal loan?
Types of collateral may include personal items such as real estate, business or personal vehicle, investment accounts, or personal savings. This may vary from institution to institution so confirming in the application process is essential to ensure the loan terms are acceptable.
How do I secure a personal loan with real estate?
During the application process, you will be asked to provide paperwork whether it is equity in your home or additional real estate you own.  The institution will provide you with the specific documents required to secure your loan.
What types of loans are not secured with collateral?

Loans that do not require collateral are called unsecured loans. They are based on your personal credit history, employment and commitment to pay back the loan. Unsecured loans, such as instant cash loans, tend to be riskier for the institution and therefore may result in a higher interest rate then secure loans that require collateral.

What are examples of a secured personal loan?
Car and home loans are the most common as they are backed by an asset this being the car or home and therefore secure. The risk to you is if you are unable to make your commitment to the contractual terms of the secure personal loan, this could possibly result in repossession of the vehicle or home.

Credit History and Applying for a Personal Loan

There are many factors that lenders take into consideration when approving you for a personal loan. Credit history is a factor, but if you are concerned about your credit history, impacting your ability to get a loan, know that there are options for good credit and bad credit.

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Can I qualify for a secured personal loan with bad credit?

Yes, it is possible. There are options through banks and independent organizations. There are specific financing companies that cater to those people with bad credit. You can also check out peer to peer lending bad credit options.

Do secured loans affect credit score?

Secured loans and personal unsecured loans can impact credit score as they are reported to credit bureaus regarding payment history, and balances owed on the account. However even with a lower score you can get fair credit loans.

Will a secured personal loan help my credit?

Yes, it can help your credit.  As one example, if you use the loan to consolidate your credit cards, then your credit cards are showing as paid off which also helps your debt consolidation which impacts your credit history. Also, by making your payments on time for your personal loan, payment history and balance paid are reported to credit bureaus. In general these can also be easy approval loans for bad credit.

Does a secure personal loan show up in my credit report?
A secure personal loan will be reported to the credit agencies.  What is reported is typically timely or late payments, the number of payments made, and the amount owed.
I need to build up my credit, is a secure personal loan a good option?
Yes. This is an excellent way to build credit and show creditworthiness for future loans or more significant purchases such as buying a home.

Understanding the Different Types of Loans

Knowing the different types of loans will help you better understand your options and give you a good background when considering getting a personal loan.

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What is a secured installment loan?

If you are looking to build your credit consult your banking institution. By taking out a loan with the institution, the payments are kept in the make allowing you to make payments to show credit-worthiness. So these can be monthly installment loans no credit check direct lenders offer.

What is a certificate secured loan?

A credit union is also an option by which you can secure a personal loan. With a certificate secured loan, the amount available to borrow is based on what is in the borrowers shared account. Read more about how to get a loan with no credit.

What is the difference between a bank loan and a peer to peer loan?
A bank loan is your standard loan through your bank. A peer to peer is a trending option that allows you to take out a credit without the backing of a financial institution.
What is a time account cd savings secured loan?
Certificates of Deposit also known as CD’s may be used as a saving tool, but some institution does allow CD holders to borrow against the money.
What is a signature secured loan?

Signature loans may also be referred to as a good faith loan. Borrowers should have a good credit history, employment with income to pay back a loan. A co-signer can be added which means they sign a promissory note and are notified should the main borrow default.

Is a 401K loan secured or unsecured?
A 401K loan is a loan against your retirement plan. You may not pay interest on the loan, but the lesser the funds may impact any potential gain you may have on your investments.
What is a HELOC secured loan?
Home Equity Line of Credit (HELOC) is a secured loan with the collateral as your home. The lender will use the maximum amount based on the equity you have in your home.  The rate is typically lower since you are securing with your home.
What is a deposit secured personal loan?
This type of loan allows you to take out a loan using a State Employee Credit Union (SECU) share savings, money manager market account or certificate of deposit as collateral.  The loan rates on a deposit secured loan are lower because the collateral is held at the SECU. To view more details on this type of loan including types of accounts allowed and not allowed refer to https://www.secumd.org/personal/borrowing/personal-loans/deposit-secured-loans.aspx.
What is a savings secured personal loan?
These are loans that use the equity in your home or personal savings account as collateral.  Because these types of loans use collateral, you may be a better rate. However, the risk is if you are unable to pay back, your collateral may be at risk.
What is a secured auto loan?

A secured auto loan is one that uses collateral such as equity in a home as collateral. Be aware of the terms of the contract.  Should you default on the loan, there may be a risk to the collateral you used. If your score is lower it may be better to go with a secured loan bad credit direct lender.

Finding the Lender that Works for You

There are many options to choose from when getting a personal loan, whether it is through a financial institution such as a bank or credit union or you also may consider the Peer to Peer lending options that are backed by investors.

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Where can I apply for secured personal loans?

There are many options through credit unions, banks, and non-financial institutions. Our site offers you a comprehensive list of options for secured personal loans including some alternative lenders that offer online loans no credit check required.

Which banks offer secured personal loans?

There are many options of banks and credit unions that offer personal loans some of which include:  Wells Fargo, PNC and KeyBank. Just talk to them and see what it takes to borrow some money.

Does Bank of America offer secured personal loans?
Bank of America does not technically offer personal loans. However, they do have options such as secured or unsecured business loans if you are in the market for financing your new business venture.
Does Chase bank offer secured personal loans?
Chase bank does not offer secured personal loans however they do provide signature loans and unsecured online loans to assist with short-ter4m financial assistance.
Who has the best personal loans?
There are many options out there to choose from and may vary concerning requirements.  It is important to research and find the best options for you and your financial need and repayment requirements.

Understanding the Process

Getting a personal loan is not hard. Here are some questions that discuss the specifics when trying to obtain a personal loan.

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How long is the process to secure a personal loan?

The first step is identifying the documents needed and having them readily available.  Most lenders have an online process that allows for fast loan approval. To complete the application process on average is 7 business days. 

How long does it take to secure a personal loan and funds to be deposited in my account?
This will vary by institution and your access to documents and providing them to the institution you choose. The application process on average can take 7 business days with funds usually deposited 2-3 days after approval. Most lenders will have an easy to access website where you can view status.
What is the interest rate on a secured loan?

This can vary from institution to institution but is based on the amount of the loan and the value of your collateral.  The maximum Annual Percentage Rate (APR) is a 36% interest rate. Use a free personal loan calculator to see what payments would look like with these rates.

What amount of money can I take out for a personal loan?
A small or large amount will depend on your credit rating, income and debt to ratio income. Your debt to ratio income is your monthly payments divided by your gross monthly income.
Can you consolidate personal loans?
Personal loans are typically not consolidated rather they are used to consolidate your credit card debt or other loans you may have. You can always ask the institution as rules change, but you must pay off the existing loan that you have.
What if I only want to take a small amount out for a secure personal loan?
The amount you take out is your choice.  It is wise to take out only what you need to address your financial need. A smaller dollar amount is easier to pay back, and the interest rate may be lower.
Can I take out a large amount for a secured personal loan?
The maximum you are allowed to take out will be based on your credit history, collateral, and terms of the institution.  Keep in mind the more significant the amount taken, it may result in a higher rate and a longer time commitment to pay back.
What documents are needed for a secure personal loan?
Standard documentation is employment information such as paycheck stubs and state ID. Other documentation will depend on the collateral you are using. As one example, if you are using home equity, you may need to have mortgage documents readily available.
What if a person is deceased and still owes on a personal loan?
The executor of the will needs to notify the lender and provide documents. If the deceased did not address in the will how debt should be resolved or have a next of kin to pay the loan, then the lender can seize collateral from deceased but not hold the next of kin responsible for the debt.
What if I’m on Social Security, can I still take out a loan?
Yes, there may be limits as you may not have an income to provide but if you have collateral such as equity in your home, taking out a personal loan may be an option for you.

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Christine has a solid background in personal finance as she spent the last eight years working at one of the biggest banks in the US. She managed her own team of financial advisors that helped hundreds of people with their financing needs. Her innate understanding of different financial products and loans helped her move up the ranks quickly after graduating with a degree in Business Administration.