Best Secured Personal Loans

You might need a secured personal loan to help you consolidate debt, pay for emergency repairs or medical bills, or fund a large purchase like a new appliance. To be eligible for a secured personal loan, you’ll need equity in your home or vehicle. But you can often get a lower APR and higher borrowing limits with a secured loan. In our search for the best secured loans for bad credit, our team of financial experts reviewed and ranked more than 30 online lenders to help you make an educated decision on the best secured loan for your needs.

Best Secured Personal Loans for 2023 — Full Overview

How to Choose the Best Secured Personal Loan

When evaluating lenders, our team of financial experts considered the following parameters, which may be helpful for you to pay attention to as you narrow down your options:

• Loan Features: Find a secured lender who can give you the amount you need with a monthly payment you can afford, and make sure you aren’t restricted from using the funds for what you need.
• Interest Rates and Fees: Choose the lender with the lowest APR that you can qualify for, and always avoid lenders that charge prepayment penalties.
• Application Process: Prioritize lenders that offer a prequalification option that won’t hurt your credit, and make sure you can get the funds in a timely fashion.
• Qualification Process: Eliminate any lenders you can’t qualify for based on your credit score or income. If there’s a membership requirement, make sure you can meet it before applying.
• Customer Support: Make sure the lender’s customer support team is conveniently accessible to you. We prefer lenders that provide extended customer service hours and a live chat.
• Online User Reviews: Check out what customers are saying on Trustpilot, ConsumerAffairs, and Credit Karma. Look for patterns in complaints that might be cause for concern.
• Perks and Bonuses: Some lenders offer payment flexibility, hardship protection, or perks like mobile app management. If any of these are important to you, verify that the lender offers them.

What Is a Secured Personal Loan?

A secured personal loan is a lump sum installment loan that requires the borrower to offer collateral to receive the funds. The lender takes a lien on the collateral, such as a motor vehicle, to protect against the chance of default. Once the loan is repaid with interest, that lien is removed.

How Do Secured Personal Loans Work?

You typically need to have a minimum amount of equity in your home or vehicle. Some lenders that offer auto-secured loans may require you to own your vehicle outright. By accepting a secured loan, you give the lender the right to take possession of the collateral in the instance of default. However, you can still use your collateral while the loan is outstanding, as long as you continue making payments.

Reasons to Get a Secured Personal Loan

Applying for a secured personal loan can help you get a lower rate, but it’s still not a good idea to borrow money for something that isn’t a need. Some common circumstances when it may a good idea to get a secured loan are:

• Debt consolidation to save money on interest
• Home or vehicle repairs
• Large purchases, such as appliance replacement
• Medical bills
• Emergency travel
• Moving costs
• Wedding expenses

How to Get a Secured Personal Loan

The process will vary by lender. But in general, you can expect the following.

• See where you stand: Check your credit report at AnnualCreditReport.com and dispute any errors. Next, check to see how much equity you have in your home or vehicle, and eliminate any lending options you don’t qualify for based on the collateral you have.
• Prequalify with a few lenders: Choose two or three lenders that you think you can qualify for and check your rate. This will only require a soft credit check.
• Select the best offer: Choose the lender that can offer you the lowest APR, the fewest fees, and the best terms.
• Plan for repayment: Secured loans can be risky, so it’s important to have a plan for repayment. Build your monthly payment into your budget and make sure you won’t be stretched too thin.
• Provide additional documentation and apply: You’ll need to prove you own your collateral, and some lenders will require an appraisal or a Limited Power of Attorney. Once you formally submit your application, the lender will run a hard credit check, which will minimally and temporarily decrease your credit score.
• Sign and accept: After reading through the terms, sign your loan documents in the lender’s online portal.
• Wait for direct deposit: This can happen as soon as the same day or up to a couple of weeks later if you’re required to mail documents or schedule an appraisal.

Where Can You Get a Secured Personal Loan?

Secured personal loans are most commonly offered at banks and credit unions, but a few online lenders also offer them. The process is often streamlined and can be faster when you go through an online lender. With some lenders, you may be able to apply directly for a secured loan. With others, you’ll submit a personal loan application and may be offered either an unsecured or secured loan. If you’re looking for a collateral loan with bad credit, your best bet will likely be an online lender like OneMain Financial or Oportun.

Secured Loans to Avoid

• Title Loans: These are short-term, no-credit-check loans secured by the title of your vehicle. Because the APR is typically 300%, title loans are risky and difficult to repay. In fact, one in five title loan borrowers end up having their vehicles repossessed by the title lender, according to the CFPB.
• Secured Loan Scams: If anyone asks you to “secure” a loan with upfront payment, such as a prepaid card, it’s definitely a scam. Should you choose to work with a secured lender that is not on this list, make sure they are registered in your state.

Conclusion

A secured loan can provide you with a lower APR or even qualify you for a loan you might otherwise not be eligible for. But since there’s always the risk of losing your possession if you default, you should carefully plan for repayment of your secured personal loan. Make sure you choose a term with a monthly payment you can afford, and choose the best option that you qualify for based on your available equity and creditworthiness.