Secured Personal Loans Guide

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Secured personal loans are just personal loans that are secured by collateral. This means that if you default on your loan, your lender can take ownership of the collateral to cover the remaining balance on your loan.

Common types of collateral include vehicles, property, boats, cash, bonds, and more. Collateral can be almost anything that could cover the cost of your loan if you default on your payments. 

Since putting up collateral reduces the lender’s risk, secured personal loans generally have lower interest rates and more favorable terms than unsecured personal loans, which don’t require collateral.

Personal loans can be used for pretty much anything, from paying bills to funding your next big vacation.

Who Should Consider Secured Personal Loans?

Secured personal loans are great for borrowers with low credit scores. Since you have to put up collateral to take out a secured loan, your credit score isn’t as large of a factor in determining your interest rate.

In some cases, like when buying a house or a car, secured loans are often the only option and are secured by the property you purchase with the loan.

How Much Does a Secured Personal Loan Cost?

The total cost of a secured personal loan is determined primarily by the loan limit, interest rate, term, and fees.

●     Loan Limit:  Loan limits for secured loans are typically equal to how much money your lender could recoup by selling your collateral. For example, if you used a $20,000 car as collateral, your loan limit would likely be $20,000.

●     Interest Rate:  Secured personal loans can have fixed or variable interest rates. Interest rates vary by lender and are determined primarily by your credit score, collateral, and income.

●     Term:  Terms for personal loans are typically on the shorter side and can be anywhere from one to five years.

●     Fees:  Be sure to check with your lender to see which fees you may be responsible for. This could include origination, prepayment, late payment, and other fees.

Once you have these numbers, you can use a loan calculator to find your monthly payments and the total cost of your loan.

Benefits of Secured Personal Loans

Secured personal loans can offer a number of benefits you might not find with other types of loans, including: 

●     Higher loan limits

●     Lower interest rates

●     Longer repayment terms

●     Easy to qualify for

Ultimately, since you reduce the lender’s risk by providing collateral, secured personal loans are typically much easier to qualify for and offer more flexible terms the unsecured loans.

Tips for Applying for a Secured Personal Loan

Ready to apply for a secured personal loan? 

Consider these tips to make the application process as easy as possible.

Decide What to Use for Collateral

If you want to take out a secured personal loan, you have to determine what you own that can be used as collateral. 

This could include:

●     Vehicles

●     Cash

●     Investments

●     Savings Accounts

●     Real Estate

●     And More

Remember that if you don’t pay off your loan, you risk losing your collateral, so you shouldn’t take out a secured personal loan unless you’re confident that you can afford to pay it back.

Compare Lenders

Comparing rates and terms from various lenders, including banks, credit unions, and online lenders, will help you find the best rates and terms available.

Additionally, it’s important to do as much research as possible before applying. Submitting multiple applications will result in multiple hard inquiries on your credit report.

Gather Documents & Apply

To apply for a secured personal loan, you’ll likely need the following documents:

●     Personal ID

●     SSN

●     Proof of Income

●     Proof of Employment

●     Collateral appraisal

Be sure to check with your lender for a complete list of documents.

After applying, if you’re approved, you’ll receive an offer which dictates the loan terms. Make sure to carefully review your offer to ensure that you agree to the terms before signing.

After you sign your loan agreement, your funds will be disbursed.

Typical cost is


Monthly payment on 5 year loan with no origination fees, 5.61% interest, good credit, and $25,000 balance