A secured loan is a good way to get a large amount of money quickly. As a rule, with an unsecured type of loan, you cannot qualify for a large loan, since the lender does not have a guarantee of repayment of funds, however, the collateral guarantees him that he can sell it if you cannot repay the loan. You need to know that almost anything can be accepted as collateral, however, this should be allowed by law. However, lenders prefer assets that can be easily collected and sold for cash compensation. Often, your collateral depends on the type of loan you are using. For example, you can use real estate as collateral in order to receive a large amount. You can also use a car and other vehicles. If you don't have a car, you can also use the equipment, cash accounts, insurance policies, and other valuables. So, as you can see, a large number of things can be used as collateral to help you get a loan and deal with both financial difficulties and starting a new business.

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What is a Secured Personal Loan?

A secured Personal loan is backed by some type of collateral - your home or a car, or any other property. In case you fail to repay the loan, this financial asset can be used as payment to the lender.

Fear of losing your valuables is supposed to incentivize borrowers to repay the secured Personal loan on time. It also helps to avoid loan repossession or foreclosure which is good for both a borrower and a lender.

Secured Loans allow you to pledge some property in order to get lower interest rates or a larger loan amount even with a bad credit score.

How do Secured Personal Loans work?

You apply for a secured loan online. Filling out an application form you choose what collateral you're going to use to "back" the loan. Below we’ll provide a full list of all the possible collaterals.

In case you face some difficulties in the loan repayment, a lien is put on your property which means the lender sets the legal term to claim your collateral. The lien may be kept until you repay the full cost of the loan.

Only after this, you can revert the ownership of the collateral. And unfortunately, it’s possible to lose it if the loan defaults.

Make sure you can afford a secured Personal Loan to protect yourself from losing any valuable staff of yours.

How do I get a secured loan?

If you decide to apply for a secured loan, there are several steps you need to take. Study them and only then apply.

  1. The first step is to check your credit. Before applying for a secured loan, it is important to check your credit report. Getting a loan depends on your creditworthiness. Even though secured loans ask for fewer eligibility criteria than unsecured loans, you still need to know what your credit rating is and what interest rates you can apply for. You can check your credit report for free every 12 months. Of course, in order to have a good credit report, you must pay off your loan debts on time. If you miss payments, it also reflects on the report and makes it worse. Thus, you run the risk of getting unfavorable interest rates. Keep track of your report and improve it.
  2. The next important step is to check the value of your assets. Before applying for a secured loan, look up estimated resale value of your assets. This is important because your asset often determines the amount you can receive. The more valuable your assets are; the more amount you can apply for.
  3. The third step is to compare offers from different lenders. Before applying and receiving money, check the various offers. Thus, shopping around allows you to see what conditions, interest rates, commissions, and payments are offered by different lenders. Many lenders offer you to go through a prequalification procedure that does not affect your credit so that you can understand what conditions and interest rates you can get. Thus, by examining various offers and going through several prequalification processes, you can find the most beneficial one for you.
  4. You are now ready to apply. By examining the offers of different lenders, you will surely be able to find the most competitive one. This way, you will be able to get good interest rates and conditions that will help you pay off your loan on time. You can also use online lending services, which are now provided by many lenders. If you choose to apply online, then the entire process can also be completed without having to travel to the lender's store. However, if you are applying to a bank or credit union, then you will have to visit your lender to complete the process.

Secured Personal Loans From Banks and Online Lenders

Mostly secured personal loans are to be found online from direct lenders or from traditional banks or credit unions. Each of these lending organizations may have different requirements, rates and terms. Find out loan details individually. Or compare the best lenders for secured loans online.

What types of secured loans are provided online?

Most lenders prefer to approve secured loans because they have a guarantee that they will receive your collateral if you default payment. Thus, if you miss it, you risk losing your collateral, as the lender will take it. All of the following loans are secured and you will need to provide collateral in order to receive one of them.

  • Secured Personal Loans for bad credit. It's any loan borrowed for your personal needs. Usually, they come in amounts from $5,000 to $35,000 and can be granted even to bad credit applicants. Various types of collateral can be used. Besides, you can apply for a Personal Loan with a co-signer or co-applicant option.
  • Mortgage. By using a mortgage, you put your home or property up as collateral so that you can buy this home. However, this is risky, because if you miss a payment, your home can be foreclosed. Thus, it is important to be very careful in order to avoid this.
  • Auto Title Loan. With this type of loan, your car will be used as collateral. More often than not, you will be able to continue using your car even while the loan is being paid. However, it is also worth remembering that if you do not make timely payments, your vehicle could be seized.
  • Home equity line of credit. This credit line was created in order to give you access to your home equity in the form of a credit line. Thus, this line of credit works just like a credit card.
  • Business loan. If you need money in order to pay wages, invest in projects and so on, you can use a business loan. When choosing this loan, a large number of items can be used as collateral (for example, equipment or your land).

Before choosing the type of a secured loan you need, compare the lending organizations offering such financing:

What Types of Collateral Can be Used to Secure a Loan?

Collateral can come in different forms which are nor forbidden by law:

  • Houses, or other real estates
  • Bank accounts, including checking accounts, savings accounts, certificates of deposit accounts, and money market accounts
  • Vehicles - cars, trucks, SUVs, motorcycles, boats, etc.
  • Stocks, mutual funds, or bond investments
  • Insurance policies, including life insurance
  • Precious metals, high-end collectibles, and other valuables

However, lenders easily sold assets that they consider to be liquid.

The value of the collateral must be roughly equal to the secured loan amount.

What are Secured Personal Loans advantages?

  • A secured loan is easier and faster to get.
  • Bad credit borrowers have more approval chances with secured loans.
  • Interest rates for secured loans tend to be lower than those for unsecured loans.
  • Secured loans come in higher amounts.

On the other hand, secured Personal loans offer less time to repay the money. And the approval process may take longer time because of the evaluation of the collateral during the approval process.

Where to get a secured personal loan?

  • Apply to a bank if you have a saving account. Among the largest banks that offer secured loans are Wells Fargo, Chase Bank, Bank of America, etc.
  • If you are a member of a credit union, secured loans from credit unions are a good option to build credit or get cash quickly at a lower rate.
  • The fastest and easiest way is getting a Secured Personal loan online from direct lenders. Legitimate lending companies such as Credible, Lend You, CashNetUSA and others charge a maximum APR of 36% and offer collateral loans even to bad credit borrowers.

Co-Signed vs Joint Personal Loans

If you have bad credit or low income and want to raise your chances to get a Personal Loan at lower rates, it’s worth considering joint or co-signed personal loans. You can share the responsibility for the loan adding a second borrower to your loan application.

What’s the difference between a joint and co-signed personal loans?

What is a cosigner and a co-borrower?

Applying with a cosigner and co-borrower you increase your chances of Personal loan approval. They are supposed to have better credit score, income, and debt-to-income (DTI) ratio than you because these factors will influence the lender’s decision.

Although a cosigner and co-borrower are practically the same, there are some differences:

  • Co-borrowers (or joint borrowers) share and repay a debt together. If you default, you are both responsible for the debt.
  • Cosigners (or guarantors) just help you to get the loan but you are responsible for repayment. Still, in case of default you are both liable for the debt.
What are the cosigner requirements?

Secured loans for bad credit 

Most applicants choose secured Personal Loans as they are cheaper than a traditional cash advance. Your rates can be significantly lower if you apply with a cosigner.

How much your rate falls depends on the following factors:

  • The co-signer’s credit score.
  • Your and co-signer’s credit histories.
  • Your combined debt-to-income ratio.
  • The lender’s requirements.

For example, if you borrow $10,000 Personal Loan with a co-signer, you can save more than $1,700 in interest.

What happens if you are unable to repay the secured loan?

As already said, before applying for a secured loan, it is very important to have a repayment plan and be confident that you will be able to do it. However, what are the consequences if you cannot repay the secured loan?

Typically, after a few missed payments, your lender repossesses the asset used to secure the loan. Moreover, in most states, the lender does not even need to notify you of the repossession. Also, in addition to this, it is important to pay attention to one more point, as the situation may become even worse. If the repossessed asset cannot be sold for an amount that can cover your loan, you are responsible for the difference. You can easily see this with an example. If you owe $ 10,000 and your collateralized car sold for $ 7,000, then you will owe the bank the outstanding $ 5,000. To make matters worse, the repossession stays on your credit report for seven years, so your credit history will be greatly worsened.

If you took out a mortgage, home equity loan or business loan and could not repay the loan, the money return process will take longer. In some USA states, the lender must go to court to foreclose on a property. In other states, the lender must notify you of foreclosure. Thus, it is important to know about your state’s laws.

Advice: if you do not have the money to make a payment, it is best to inform your lender in advance. In this case, you can change the terms of the loan in order not to lose your collateral, real estate or business. Use the received loans wisely and do not skip payments!