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Can I Get a Personal Loan With Collateral?

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Dana George
Author: Dana George
Dana George
Dana George
Writer

Dana George has a BA in Management and Organization Development from Spring Arbor University. For more than 25 years, she has written and reported on business and finance, and she's still passionate about her work. Dana and her husband recently moved to Champaign, Illinois, home of the Fighting Illini. And though she finds the color orange unflattering on most people, she thinks they'll enjoy Champaign tremendously.

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If you have an item of value, like a savings account or car, you can put that item up as collateral, making it easier to get a personal loan. This type of transaction is called a "secured loan," because the collateral literally secures the loan. Collateral can secure all types of loans, including bad credit loans. In this article we will cover how to get a personal loan using collateral, discuss the advantages and disadvantages of using collateral to secure a loan, and help you decide what works best for you.

Getting a personal loan with collateral

If your goal is to get a personal loan with collateral, these are the steps to take:

  1. Decide what to use as collateral
  2. Find secured loans
  3. Compare multiple lenders
  4. Decide on a lender

What can you use for collateral on a personal loan?

Consider what can be used as collateral on a personal loan by thinking about items of value that can be professionally appraised. For example:

  • Cars
  • Investment accounts
  • Retirement accounts
  • Stocks
  • Real estate
  • Fine jewelry
  • Fine art

As long as the value of the collateral in question is high enough to protect the lender against loss, it is eligible to be used as collateral.

While a loan can provide quick funds, it's also a risk -- the lender can repossess and sell your collateral if you miss payments. As you would with any significant financial decision, take your time and consider how much risk you're willing to take.

Compare the best personal loans

Get the best rates and terms to fit your needs. Here are a few loans we'd like to highlight, including our award winners.

Lender APR Range Loan Amount Min. Credit Score Next Steps
Fixed: 8.99%-29.99% APR (with all discounts)
$5,000 - $100,000
680
7.99% - 24.99%
$2,500 - $40,000
660
7.80% - 35.99%
$1,000 - $50,000
300

Find secured loans

There are two types of personal loans: secured loans and unsecured loans. If you use collateral to get a loan, you're taking out a secured loan. We'll go into more depth on secured loans below.

What is a secured loan?

A secured loan is a loan that you get with collateral.

You apply for a secured loan almost the same way you apply for a regular personal loan. And you can use the money from the loan for whatever you want, just like other personal loans. The main difference with a secured loan is what happens if you don't pay your loan.

With a regular loan, the lender can sue you if you don't pay -- but they can't take anything you own. With a secured loan, you agree to give the lender something specific (like your car or your retirement account) if you can't pay back the loan.

If you're looking at getting a loan for bad credit, a secured loan may be your best option. It's easier to get approved for a secured loan than an unsecured loan. Secured loans are also a helpful option if you need to get a loan with no credit.

Compare multiple lenders

Ready to get a loan with collateral? Make sure you compare several personal loan lenders before making a decision.

One of the best ways to compare lenders is to get pre-qualified for a personal loan. This shouldn't impact your credit (ask your lender to double-check). Getting pre-qualified isn't a commitment to borrow from a specific lender. It's just an opportunity to get a more personalized loan offer from a lender, based on your unique financial history.

Whether you're establishing or rebuilding credit, a secured personal loan can be an effective way to create a positive credit history.

Should I get a secured loan?

The upside of a personal loan is that you can get a loan even if you have poor credit, a thin credit history, or some other issue standing between you and easy loan approval. A secured loan is also beneficial because you pay a lower loan interest rate than you would pay on an unsecured personal loan.

The downside is that you risk your collateral. Remember, the lender has a legal right to take possession of the collateral and sell it if you don't make payments as agreed.

Whether you take that risk is a personal decision. Only you know how easy (or challenging) it will be to make payments. You are the only one who can decide how important getting a personal loan is to you.

Got bad credit and need a personal loan?

We've run the numbers and read through the fine print to find the loan options with competitive rates and low-to-no origination fees. Learn more about our top picks by clicking below.

Best personal loans for bad credit