Ultimate Guide to Secured Personal Loans

HomeManage MoneyUltimate Guide to Secured Personal Loans

Want to Score Cash For Free?

  • Survey Junkie: Earn up to $50 per survey with one of the highest-paying survey sites on the web. Join Survey Junkie Now
  • SoFi Money: Earning money for unlocking better features sounds like a dream. But this free banking app really pays you $100 with you switch your direct deposit to SoFi Money. Get SoFi Money.
  • Aspiration: This mobile banking app lets you do everything for free and takes no fees — ever. Better yet, if you join through this link you can get $100 in your new account.

Need a secured loan that is backed by collateral? In this article, we will share everything you need to know about getting a secured personal loan.

Many people have the impression that borrowing money from financial institutions is a very complicated and difficult matter but this is not always true.

Banks, mortgage lenders, and other finance houses are always willing to lend money to people who have financial integrity. These money lenders also finance institutional investors with viable business ideas. The point here is that money lenders are not in business to lose money. This is why finance houses usually give secured loans to people that want to borrow money.

What is a Secured Personal Loan?

A secured personal loan is one that is backed by collateral. These typically include loans such as auto loans, home equity loans, and title loans. People with poor credit can opt to offer collateral such as a vehicle or home and lenders are able to reduce their risk and lend prospective borrowers money.

How Much Can You Get with Secured Personal Loans?

The amount of money you can get with a secured personal loan depends on the value of your collateral. If you have an asset such as a vehicle worth $10,000, then you can borrow up that amount. This is because if you fail to pay back the money, the lender can sell your car to recoup any losses. 

Just remember that if you have a positive credit history or the ability to repay the loan then you may be able to receive more than the value of your collateral.

Types of Secured Loans

A secured loan is a loan in which the borrower pledges some asset as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan. (Wikipedia)


Want Free Money?

  • Aspiration: Want to get spotted a $150 for free? Simply sign up for Aspiration, and the free banking app will give you cash for free, you just relax while it gives you $150 just for opening a new debit card. There’s no catch. This bank account is legit and only takes two minutes to sign up for an account.

Types of secured loans include:

  • Auto loans (new and used).
  • Loans against your lien-free auto (title loans).
  • Recreational vehicle loans.
  • Boat loans.
  • Home Equity Lines of Credit (HELOCs).
  • Pawnshop loans.

Advantages of Secured Personal Loans

If you are considering taking on a secured loan then consider these advantages:

  • Competitive interest rates. Since you are offering up collateral then you are able to get a lower interest rate over an unsecured loan.
  • More money. Since you are pledging some type of asset be it your home or car, the lender knows you’ll likely pay back the loan and will offer more.
  • More flexibility. Compared to unsecured loans you will be given more flexible repayment options, which can really be beneficial.

Disadvantages of Secured Loans

Whenever you are borrowing money — expect some disadvantages:

  • Collateral comes with risk. Since you pledging your collateral — if you do not repay back the loan then your assets may be lost.

How to Get a Secured Personal Loan

If you need a loan, you have to follow the right procedure so that the money lender will approve the loan and make the cash available you. Below are the steps you should take to improve your chances of getting the loan.

Write Out Your Plan

No bank will lend you money unless you have a plan for the cash you want to raise. Write out a detailed are a few examples to illustrate how the process works. If you take out a mortgage loan, your house is the collateral in this case. If you are not able to repay the loan, you will forfeit your house to the creditor. If you borrow money to execute a contract, you might pledge your car as collateral. If you are unable to repay the loan, you will lose your car to the creditor.

Note that your creditor wants you to succeed. Banks and other finance houses are not in business to impound and sell the collateral. You only lose your collateral in cases where it is clear that you cannot repay the loan. Finally, a secured loan must go with collateral to protect the lender. Write a great proposal, give your banker collateral and you will get the loan you need.

what is an installment loan

Make sure to plan and state clearly why you need the money. This plan is also called a proposal and it usually includes the following things:

Why You Need the Loan.  Banks usually lend you money from the perspective of investment. If you have a great investment idea but you do not have enough money, your banker will give you a loan to actualize your investment dream. Note that your plan should be honest and convincing. If your plan is unrealistic, you will not get the loan.

Your Repayment Plan. A loan is not the same thing as a grant. The organization giving you the loan expects you to repay the loan and keep to the terms of the deal. You must write out your repayment plan and state clearly how and where you will get the cash to repay the loan. Your repayment plan must be detailed and should contain verifiable information. If you are borrowing money to expand your business, you should repay the loan from increased turnover and a higher profit margin. If you are borrowing money to fund a specific contract, you should pay off the loan after you get your cheque from the people giving you the contract. If you are taking a long-term loan, you should state if you will make payments monthly or quarterly. Give your banker specific information and you will be more likely to get the loan.

Credit History. Many banks and finance lenders are impressed if you have a positive credit history. If you have taken out loans in the past and repaid them successfully, this will count in your favor. In case you have enjoyed credit facility in the past, include this in your plan. Once the bank verifies that you are telling the truth, you will easily get the loan. Note that banks have ways of getting information from other banks. If you took a loan from another bank in the past and you defaulted, your present banker will find out. Do not lie to your banker and do not make any unsubstantiated claims.

Making the Loan Secure

A secured loan comes with collateral and a personal loan doesn’t. In simple English, collateral means a borrower’s pledge of property to a lender. This collateral secures the loan in the sense that if the borrower defaults, the lender can sell the collateral and recover the loan.

Collateral takes many forms depending on the amount of money you want to borrow. In most cases, banks accept land and real estate as collateral. Other acceptable forms of collateral are cars, machinery, share certificates, and valuable equipment.

Unsecured Personal Loan Options

CompanyLoan AmountAPR
sofisofitrustpilotUp to $100,0005.99% - 16.19%

VISIT SOFI

best personal loansbest personal loans$1,000 to $100,0005.99% to 35.99%

VISIT CREDIBLE

zippyloanbest personal loans$100 to $15,0005.99% - 35.99%

VISIT ZIPPYLOAN

best personal loansbest personal loans$1,000 to $35,0007.99% - 35.99%

VISIT UPGRADE

GoDescription
aspiration

Want Free Money?
Aspiration

Simply sign up for Aspiration, and the free banking app will give you cash for free, you just relax while it gives you $100 just for opening a new debit card. There’s no catch. This bank account is legit and only takes two minutes to sign up for an account.

Learn more


The Best Apps to Save You Real Money

We are on our phone a lot, right? Wouldn't it make sense to save money with the best money saving apps?

AppAt a glancedownload
aspirationAspiration
★★★★★
Get a $100 bonus at Aspiration when you open and fund an account with $10 or more. Then use your Aspiration debit card to make at least $1,000 worth of cumulative transactions within 60 days of account opening.
CLAIM $100 BONUS
robinhoodRobinhood
★★★★★
Open a new account in the next 24 hours and you could get up to $200 in free stock.
CLAIM FREE STOCK
Truebill reviewTruebill
★★★★★
This free app delivers on its promise to save you money effortlessly. You can use it to lower your bills, cancel unwanted subscriptions and bill negotiations.
SLASH YOUR BILLS

About the author

Brian Meiggs
Brian Meiggs
Brian Meiggs is a personal finance expert, and the founder of My Millennial Guide, a personal finance site helping you put more money in your pocket. He helps millennials follow the smart money in order to increase their earning potential and start building wealth for the the future. He regularly writes about side hustles, investing, and general personal finance topics aimed to help anyone earn more, pay off debt, and reach financial freedom. He has been quoted as a top personal finance blogger in major publications including Yahoo! Finance, NASDAQ, Discover, MSN Money and more.

LEAVE A REPLY

Please enter your comment!
Please enter your name here

On a similar note...

Explore More On

7 Best Bank Bonuses and Promotions of April 2021

ImageDescriptionlearn-more
aspiration★★★★★This Company Will Give You $100 for Opening a Free Account
Boost your savings and earn up to 1.00% APY interest on your savings. Get up to 10% cash back on your purchases. Get $100 bonus when you spend your first $1,000 with your new Aspiration Plus Card.
COLLECT $100 BONUS
personal capital★★★★★
The First and Only Interest Earning Crypto Account
Receive up to $250 Bitcoin bonus when you make qualifying deposits over the first 30 days. Receive up to 8.6% annually on your crypto. Join the most trusted financial services for crypto investors on the market.
CLAIM $250 BONUS
personal capital★★★★★Get Up $200 in Free Stock for Joining
Commission-free stock, ETF and options trades. Get a free stock worth up to $200 when joining (must complete application). Simple, easy to use investor platform with no account minimums.
GET FREE STOCK
sofi★★★★★All-In-One Investing That's Easy to Use
Tired of Robinhood? Invest in stocks, ETFs, crypto, or automated investing in all one app. No commissions for stocks and ETFs. Complimentary access to SoFi Financial Planners.
INVEST NOW
personal capital★★★★★The Smart and Free Way to Manage Your Money
Take control of your finances with the perfect union of technology and highly personalized service. Get access to free online financial tools, including retirement planner, investment checkup, net worth calculator and more. Digital-first wealth management advisor with 24,000 clients in 50 states.
SIGN UP FREE
blooom★★★★★401K and IRA Management
Start your free 401k and IRA management now. Find and reduce hidden fees. Improve your diversification.
GET FREE CHECKUP
cit★★★★★Enjoy the Benefits of a CIT Bank Money Market Account
A CIT Bank Money Market Account helps you get more from your savings with interest rates for maximum growth. Earn over 7x the national average with high-interest rates. It now pays to open a money market account with CIT Bank.
OPEN ACCOUNT
My Millennial Guide