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What Are Secured Personal Loans?

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The Top 5 Secured Personal Loans for 2021

Good credit and bad credit borrowers can qualify for secured personal loans using most banks, credit unions, or online lenders. Secured personal loans decrease the risk for the lender and increase the risk for the borrower. If you have credit challenges you should consider a secured personal loan rather than an unsecured personal loan. Keep reading to learn what a secured personal loan is and how you can get one.

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Good credit and bad credit borrowers can qualify for secured personal loans using most banks, credit unions, or online lenders. Secured personal loans decrease the risk for the lender and increase the risk for the borrower. If you have credit challenges you should consider a secured personal loan rather than an unsecured personal loan. Keep reading to learn what a secured personal loan is and how you can get one.

What is a secured personal loan?

Secured personal loans are backed by collateral, thus making them easier to obtain than unsecured personal loans. However, if you default on a secured loan the lender can keep your collateral. Borrowers can use collateral such as a savings account, real estate, or a vehicle. The collateral should be of similar value compared to the loan amount. This means if you need to borrow $60,000, you most likely will not be able to use a $20,000 vehicle as collateral. In exchange for the collateral, lenders can typically offer lower interest rates and longer terms for secured loans. Lenders know that borrowers will be more motivated to repay a secured loan to avoid repossession or foreclosure. If you are confident that you can cover the monthly payment and repay a secured loan in full, it may be a good option.

How does a secured personal loan work?

Secured and unsecured personal loans work about the same, aside from the fact that secured personal loans require collateral. Most lenders fund secured personal loans as a lump sum that can be repaid over time with interest. Most personal loans have fixed interest rates meaning that the rate won't change during the loan term. Personal loans with fixed interest can be much easier to manage than personal loans with variable interest rates. Fixed interest rate loans allow borrowers to have predictable monthly payments. Borrowers can select their loan amount and term based on what lenders offer them. No matter what kind of secured personal loan you choose, you should review the terms carefully. If you default on a secured personal loan the lender can take possession of and or sell the collateral to cover any losses.

Is a secured personal loan a good idea?

Even if you are overly confident that you can repay a secured personal loan, they can still be risky. Life can change quickly causing even the most confident and qualified borrowers to default on loans. However, secured personal loans may offer low interest rates and long terms which translates to a low monthly payment. This can be very attractive for borrowers. Secured personal loans can be a good idea but you should consider the pros and cons and other options.

What is the interest rate on a secured personal loan?

Interest rates for secured personal loans can vary depending on the loan amount, term, and creditworthiness of the applicant. Most lenders offer secured personal loans single-digit interest rates. Regardless of the interest rate, we always recommend choosing a lender with no early payoff penalty and paying your loan off early. Paying as little as 10% extra each month can save you hundreds of dollars in interest.

What's the difference between secured and unsecured loans?

There is one main difference between a secured and unsecured personal loan. Secured personal loans require collateral and unsecured personal loans do not require collateral.

Who offers secured personal loans?

Some banks, credit unions, and online lenders offer secured personal loans. However, it's usually easier to find lenders that offer unsecured personal loans. While almost all online lenders offer unsecured personal loans, only a handful offer secured personal loans.

Our Top 5 Secured Personal Loan Picks for 2021

Secured personal loans can be offered by banks, credit unions, and online lenders. Most online lenders advertise unsecured personal loans more often. Due to the nature of secured loans, they may need more attention than unsecured loans. If you want to use a secured loan and an online lender, you may need to contact the online lender to see if they offer a secured loan option. Below are our top 5 secured personal loan picks for 2021. . .

Wells Fargo
Wells Fargo can offer secured personal loans up to $250,000 with competitive interest rates and other perks. However, individuals will most likely need strong assets and good credit to qualify. Applicants can apply with a cosigner to increase their chances of approval. Wells Fargo requires borrowers to have collateral in the form of cash in a Wells Fargo savings account or CD. Wells Fargo customers can take advantage of long loan terms ranging from 12 to 84 months. In some cases, you may be able to extend terms to 120 months. Before extending a loan term borrowers should keep in mind that although it will decrease the minimum payment, you will end up paying more in interest. If you pay the loan off early you might be able to save on interest. If you need funds quickly, Wells Fargo can help. On approved applications, Wells Fargo can fund loans as soon as the next business day. If you want to apply for a personal loan with Wells Fargo you can submit an application online, over the phone, or in a Wells Fargo branch.

OneMain Financial
If you have credit challenges and need a smaller loan amount, you should consider OneMain Financial for a secured personal loan. Approximately half of OneMain's customers have credit scores below 620. Because OneMain Financial handles riskier applicants, they charge higher interest rates and have several fees. OneMain Financial offers secured personal loans between $1,500 to $20,000 and requires borrowers to have a motor vehicle. OneMain Financial secured personal loans are backed up by motor vehicles such as a car, truck, motorcycle, boat, camper, or RV. During the loan term, borrowers will need to keep full coverage insurance on the vehicle being used as collateral. OneMain Financial considers more than just a borrower's credit score and can fund loans quickly. To apply for a OneMain Financial secured personal loan you can start the application process online. However, customers need to complete the application process in a OneMain Financial branch. OneMain Financial has branches in 44 states.

Navy Federal Credit Union
Navy Federal Credit Union offers secured personal loans for $25,000 and up. Members can take advantage of longer loan terms up to 180 months. The minimum loan amount for a 61 to 84 month term is only $25,000 and the minimum loan amount for a 85 to 180 month term is only $30,000. Navy Federal offers fewer fees and competitive interest rates. However, in order to become a Navy Federal member and qualify for a loan, you'll need to have military ties. If you are an active-duty or retired military member you may qualify for a 0.25% rate discount. Navy Federal reviews highlight excellent customer support online, in-person, and over the phone. If you want to apply for a Navy Federal secured personal loan you can start the application online if you are already a member. Members and non-members can also visit a local branch or call the credit union to apply for a secured personal loan.

PNC Bank
PNC is one of the few major banks that offer secured personal loans with no origination fees. Although PNC may have higher interest rates, borrowers with damaged credit can use a secured personal loan with a competitive interest rate. PNC offers personal loans ranging from $1,000 to $20,000 with terms between 6 to 60 months. In most cases, PNC can fund loans within 1-2 business days. Borrowers that set up automatic monthly payments may be eligible for a 0.25% rate discount through PNC. Regardless of your location, you can apply for a PNC personal loan online or by phone. If you live near a physical PNC location you can apply in-store.

First Tech Federal Credit Union
First Tech Federal Credit Union is one of the best credit unions all around for secured personal loans. They offer competitive interest rates, payment protection, and in some cases same-day approval. First Tech Federal Credit Union determines interest rates based on how you are securing your loan. If you secure a loan using a savings account or CD you are likely to get a lower rate from First Tech Federal Credit Union. First Tech Federal Credit Union offers secured personal loans between $500 to $500,000. They also offer stock-secured personal loans from $25,000 to $1 million.

What can be used as collateral for a secured loan?

Secured loans require collateral. Depending on your assets and the things you own, this collateral could look a little different for everyone. Ultimately it will be up to the lender as to what they can accept as collateral. Most personal loans are unsecured, but your specific lender could require you to put up something that is of monetary value so that they feel more secure when giving you money. Sometimes secured options are better because they may give you more money at a lower interest rate.

Collateral can really be an asset that the loan company considers valuable and something that they could use for gain if you stop making payments. In most cases, it is a car or a home. However, if you have some other assets, you might still be able to use them even if they are considered unusual or different from a car or home.

Common collateral items can include:

The cash you have in a savings account

Cash in a certificate of deposit account (CD)






Insurance policy


Fine art



Precious metals

Future paychecks

Check with your specific lender and what they expect as collateral. Every lender is different. Sometimes you can even choose things or have things you may have never considered as collateral. Keep in mind that 401ks usually do not have value as collateral.

Also, only some cars are taken as collateral. Usually, cars that are more than seven years old do not qualify as collateral. Some lenders might not even take cars that are more than 5 years old. Make sure to ask your lender if your car is new enough to use as collateral.

What credit score is needed for a secured loan?

This all depends on the lender. Some companies and lenders are more willing to work with people who have low credit or may not be in the best financial shape. They may only offer high-interest or high payment plans though. Always check with multiple lenders before choosing one to make sure you are getting the best deal.

Most companies will require borrowers to have a credit score of at least 550-580 to qualify for a secured loan. However, if you have a credit score in the 500's or even 600's you will likely need a low debt-to-income ratio and substantial income for a lender to consider loaning money to you.

Before accepting a secured loan offer, you should calculate the total loan cost to determine if borrowing the money is worth it or not. In some cases, you may decide that you can wait and save up cash instead. Whether you use a secured loan or unsecured loan, interest and fees can add up quickly.

Does a secured loan hurt your credit?

Any time your debt-to-income ratio is raised, you may hurt your credit score. Taking on more credit may also damage your credit temporarily until you make a few payments. However, taking out loans usually only affects your credit for a few months before it bounces back to normal. Once it is back to normal, you can continue taking measures to raise the score even higher by making payments on time and lowering your debt in relation to your income.

The loan should only hurt your credit score for a very short amount of time, as long you are making payments on time. Make sure to keep your payments on automatic pay or a schedule so you know you are paying them when or before they are due.

How much can I borrow on a secured loan?

How much you can borrow usually depends on a variety of factors including the collateral you provide, credit score, monthly income, and more. The type of secured loan can also impact how much you can borrow. For example, if you use an auto loan, you may be able to borrow 100% or 110% of the vehicle's retail value. However, before finding the loan the lender will want to assess the value of the vehicle to make sure the LTV (loan to value) is appropriate. Therefore, just because you are approved for up to $20,000 or whatever amount, does not mean the lender had to fund this amount. When collateral is involved, it usually has to be appraised before the loan can be funded.

What is the main advantage of a secured loan?

There can be several benefits of using a secured loan. For starters, you may lock in a lower interest rate if you are able to provide collateral. Next, your chance of being approved may increase since the lender is being asked to loan money with a reduced risk position. Lastly, you can access the funds you need to make home improvements, finance a loved one's education, or just about anything else you need.

Some other advantages include:

Credit boost. Making payments on a secured loan should boost your credit score. It can also help you establish credit if you don't have any and help you build a score to use in the future if you want to get more financing or funding options.

Low-interest rates. Since the lender will have collateral, they may offer you lower interest rates. This means you may owe less money in the long run and be able to save money on payments. This can also help you to have money for future investments if you aren't spending so much money on interest.

Fix your damaged credit. Many people with bad or damaged credit can take secured loans because the lender knows they have some collateral for the loan. This may help you to make payments on time and in turn, fix your damaged credit.

Borrow more money. Any secured loan with collateral will give you more funding. This may be a better option if you need a high-dollar loan.

Can I pay off a secured loan early?

Once again, this depends on the lender and the terms. Before signing into the loan you will want to read through the terms and ask for clarity on any topics you may be confused about. If a lender does not have prepayment fees, you should be able to pay the loan off early. If you are able to pay the loan off early, it can save you money on interest. Whether your intention is to pay a secured loan off early or not, this should be a question you ask upfront. The faster you can pay the loan off, the faster you can reduce your debt. Debt can cause stress and require effort to manage. You should always try to pay a loan off early if it will save you money. Even that means just paying $10 or $20 extra each month on top of your monthly payment.

In addition, paying a secured loan off early can allow you to gain full ownership back of your collateral. Once the lender has their money back, they do not need to hold onto the collateral. Paying a secured loan off faster may also result in an increase in your credit score.

Is it hard to get a secured loan?

Getting a secured loan will depend on your credit score, debt-to-income ratio, and other factors. However, secured loans are considered easier to get than unsecured loans. They are backed by an asset or collateral, thus reducing risk for the lender. With collateral, the lender has an increased chance of recouping their investment in the event you default on the loan. Since there is less risk, they may have more flexible approval requirements.

In some cases, when you are unable to qualify for an unsecured loan, a lender may offer you a secured loan instead. It might have not been your first choice but at least you still have a way to get the funds you need. Some borrowers may be hesitant to use a secured loan because they don't want to risk losing assets.

There's also the chance that you don't have an asset that is considered valuable enough to be used as collateral for the loan. Collateral usually consists of a home, car, valuable piece of art, or nice piece of jewelry. If you don't have an asset, the lender might not be able to offer you a secure loan.

Common examples of secured loans include:

Auto loans


Home equity lines of credits

Secured credit cards

Secured personal loans

You should always know if the loan you are receiving is secured or not based on the terms and conditions that the lender gives you. In most cases, the lender will tell you what they will accept as collateral. Once you agree to the secured loan, the lender will place a lien on your collateral. This lien gives the lender the right to seize the asset if you default on the loan. The value of the collateral has to be equal to or greater than the outstanding loan balance. This way the lender knows they will be able to recover all of their funds.

Can you get a secured loan with bad credit?

Secured loans are often easier to obtain if you have bad credit. This is because the lender knows that they have collateral to protect their investment in the event that you default on the loan. Since this gives the lender more security and less risk, they might be more willing to give you the loan you need.

However, having a bad credit score will still greatly limit your options when it comes to getting a loan. Lenders will still want to know you can pack back their money even though they have an asset against you. Seizing the asset and getting money for it can still be hard and complicated for lenders. They would much rather just get their money back through your monthly payments.

For a secured personal loan, you should have a credit score of about 550 to 580. Having a credit score in this range or higher gives you the best chance of getting a loan that has low interest and good loan terms. If your credit score is lower than this, you might need to spend a few months trying to raise your credit score before applying for a loan. This way you have the best chances of getting a loan with good terms and a low-interest rate.

To raise your credit score, you can try lowering your debt-to-income ratio. This means paying off more of your credit card balances, lowering your credit card utilization, and making all your payments on time.

Creditors and lenders will still take the time to look at your credit score and debt-to-income ratio even though they are giving you a secured loan. If you are offered a secured loan with bad credit, pay close attention to the terms. Sometimes lenders will give you a loan, but it will be with very high interest.

Even though you have to secure the loan with an asset, there are still some pros to getting a secured loan, including:

Borrow more than an unsecured loan or credit card

Lower interest rates than credit cards and other loans

Longer repayment terms, so smaller monthly payments

Do you need excellent credit to get a secured loan?

You don't need excellent credit to get a secured loan, but it makes your chances of getting the funding you need more likely. In addition to increasing your chance of approval, having an excellent credit score can help you secure more favorable terms. If you are working toward an excellent credit score, you might want to wait to apply for a secured loan until you get to the excellent range. It truly can be worth it. Locking in a lower interest rate can save you money on interest. Some secured loans, such as auto loans or mortgages, may require down payments. If you have an excellent credit score, you may have the advantage of putting less or no money down.

How long do you have to pay off a secured loan?

This depends on your loan terms and the time you are given for repayment. Some loans will take longer to pay off than others. Generally, though, secured loans will take about 2-7 years to pay off. The larger your loan amount, the longer your pay-off term could be. Compared to unsecured loans, secured loan terms are usually more generous. If you are financing a vehicle you would expect terms between 2-7 years. However for secured loans such as home equity loans you could secure terms between 5-30 years.

Are there disadvantages to secured loans?

Secured loans, like any other type of loan, have their own set of disadvantages. Before taking out a secured loan you should consider any disadvantages. Making educated financial decisions is important for the well-being of your financial future. Here are some disadvantages of a secured loan:

Risk losing an asset: Your home or other assets will be at risk. If you are not able to pay your payments on time, you will likely be forced to give up your home or other assets that you used as collateral. It may be hard to replace the asset as your credit score may also be damaged from the default.

Interest rate might not be low enough: To entice borrowers to provide collateral, lenders often try to offer up low interest rates. If you are comparing a secured and unsecured loan option, you may find that the interest rate is not that different. If you can't justify providing collateral, you may choose to go with a less risky loan option such as an unsecured loan.

Beware of variable interest rates: Secured loans are often offered with variable interest rates. While variable rate loans might be tempting, and in some cases they can be rewarding, they are usually harder to manage. A variable rate loan does not have a consistent monthly payment and your interest rate can vary depending on the market.

Prepayment fees: As with any loan, you will need to lookout for repayment fees. Repayment fees can hinder you from paying the debt off early which means you are stuck paying all the high-interest fees.

Is it easier to get a secured loan with bad credit?

Sometimes people need to borrow when their financial situation isn't the best. An emergency might have come up like a major car repair, or you may need to consolidate their debts so that bills are more manageable. The need to borrow can come up at the worst possible time. One of those times is when a borrower has bad credit. Bad credit could be a result of financial problems that had been going on for a while. Unfortunately, bad credit takes time to correct and people often need to borrow before they can address the issue of their poor credit. Let's take a look at what a bad credit score is. Your credit rating is a three digit score. There are two primary sources of your credit score-FICO and VantageScore. Since most lenders use the FICO score, we will refer to that in this blog. Your FICO score is a product of information found on the three major credit reporting agencies-Equifax, Transunion, and Experian. The credit score ranges are as follows:

300-569-poor or bad



740-799-very good


Having bad credit can mean many things. It can mean the borrower has a delinquency, charge off, bankruptcy, loans in default, a judgment, or collections on their credit report. From the lender's point of view, it means a borrower with a poor credit rating is a credit risk. The borrower has already demonstrated that they don't pay back their borrowings on time and some don't pay them back at all. There is no real incentive for a lender to lend money to a borrower with bad credit. While they may make a nice ROI if all goes well, they must be willing to take the risk.

What is a secured loan, and can providing security help with the approval process?

A secured loan is one that is secured by collateral provided by the borrower. If the borrower fails to repay the loan, the lender can use that asset to settle part of all of the debt. Providing security for the loan can make getting approved a lot easier. If you have an asset the lender can use to secure the loan, they will be more likely to approve you for credit. Getting a secured personal loan with bad credit is easier than getting an unsecured loan with bad credit. You might get a better rate too since the lender has reduced their risk by taking security.

What can be used as collateral for a secured loan?

There are several items you can use as collateral for a secured loan. Here are some common ones:










Precious Metals

Remember, if a borrower assigns collateral, the lender can take that collateral to put towards settling the debt if the borrower doesn't pay. The borrower may lose ownership of the asset.

Do secured loans require a credit check?

Normally, secured loans require a credit check just like any other type of credit. The only way a lender will know if a borrower has bad credit is to do a credit check. A lender may approve a secured loan for a borrower with bad credit, but not an unsecured loan. Even secured loans are subject to the lending criteria of the institution which normally involves a credit check. If the borrower's credit score is too low, the lender may not approve the credit request even with security.

Which lender gives secured loans easily for bad credit?

Having bad credit doesn't mean you can't get a loan. Some lenders approve secured personal loans for borrowers with bad credit. The process may not be easy though. You may need to provide additional information like proof of income and employment, a net worth statement, confirmation of identity, and address verification. Some lenders you can approach for a secured loan if you have bad credit are Avant and Upgrade. They may consider borrowers with low credit scores. Avant can fund loans up to 35k with rates from 9.95%-35.99%. Upgrade can fund loans up to 35k with rates between 5.94%-35.97%. You may want to check with your primary bank or credit union as well to see how they can help.

What credit score is needed for a secured loan?

The credit score needed for a personal loan will depend on the lender. Some lenders like USBank want a borrower to have a minimum score of 680. Other lenders like Citibank, OneMain, and Oportun don't have a minimum required credit score. If a borrower has a credit score of 550 or higher, some lenders will consider approving secured loans with credit scores in that range.

What credit score is needed for a $5,000 secured loan?

Different lenders have different criteria for what they will accept as a minimum credit score. Some lenders will allow for a score as low as 550, while others want the minimum score to be 580, and others may want an even higher score. With a secured loan, lenders may also consider the collateral and what it's worth. Whether you are applying for a secured or unsecured loan, it's usually easier to qualify with a good credit score.

If you have credit challenges you may want to ask a lender what their credit score requirement is before applying. Some lenders don't have a minimum credit score and some may place more emphasis on other factors such as income or employment. Factors lenders may consider when approving loans are income, employment, debt-to-income ratio, and the collateral they are using to secure the loan.

Before applying for a loan you should check your credit score. If you can identify ways to improve your credit score, you should take action before applying for a loan.

Do banks offer secured loans for people with poor credit?

Some banks are willing to work with borrowers that have poor credit. Citibank doesn't have a minimum credit score for secured loans. TD Bank is willing to work with borrowers who have bad credit as well. TD Bank may also be able to help borrowers with poor credit in the form of a credit builder loan. The borrower will receive funds once they have paid the loan balance. This can be a good way to go for a borrower who wants to rebuild their credit but not for borrowers who need money immediately. If you can't find a bank that will approve a secured loan for you, you can check credit unions and online lenders. They often have less strict lending criteria which can be helpful when you have a poor credit rating.

If you prefer to deal with a bank, you can review their website or call to see what their criteria are. Sometimes they are willing to work with borrowers who have bad credit. It might be possible to get a secured loan with a bank even if your credit is poor.

Does Acorn Finance offer secured loans for bad credit?

Acorn Finance has several lending partners, some of which may be willing to help borrowers with bad credit. In most cases, borrowers go to Acorn Finance for unsecured loans, but some of Acorn Finance's lending partners can offer secured loans. Most lenders on the Acorn Finance platform have a credit score cutoff of 600 or above.


In conclusion, an unsecured personal loan may involve less risk for you. If you are looking for a personal loan that does not require collateral or down payment you should visit Acorn Finance. Acorn Finance partners with reputable lenders that offer personal loans up to $100,000 with rates starting at just 6.99% and terms up to 12 years. Some lending partners can fund loans within 24 hours. While some lenders may advertise that they can fund secured personal loans quickly, there is usually a lengthy application process that comes before the funding process. If you need funds quickly, you should use an unsecured personal loan.

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What can I do with a $10,000 personal loan?

A $10,000 personal loan has a number of uses, including (but not limited to):
Home improvement Buying a car Wedding costs
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