Best secured personal loans

When you apply for a secured personal loan, lenders require you to put up some sort of collateral to borrow the money, such as a car. In many cases, you may be able to score a larger loan amount or lower interest rate. But if you fail to make your payments, the lender can seize your collateral.

Unsecured personal loans don’t require you to put up collateral to get the loan, but you typically need excellent credit to qualify for the best rates and terms. If you have poor credit, or little or no credit history, you may opt for a secured personal loan.

• Best secured personal loans
• How to get a secured personal loan
• Pros and cons of secured personal loans
• What to consider when comparing secured personal loans
• Is a secured personal loan easier to qualify for than an unsecured personal loan?
• Alternatives to secured personal loans

Best secured personal loans

Avant

Avant has a fast online application process, including an e-signed contract, so it’s a good option if you need money quickly.

• Loan amounts: $2,000 to $35,000
• Loan terms: 2 to 5 years
• Minimum credit score: 550
• Acceptable collateral: Car
• Best for: Fast funding

Best Egg

Best Egg offers a decent range of loan amounts, and can pay your creditors directly if you choose a debt consolidation loan.

• Loan amounts: $2,000 to $50,000
• Loan terms: 2 to 5 years
• Minimum credit score: 600
• Acceptable collateral: Check with lender
• Best for: Debt consolidation

LightStream

LightStream offers high maximum loan amounts, and opportunities for rate discounts.

• Loan amounts: $5,000 to $100,000
• Loan terms: 2 to 7 years (2 to 12 years for home improvement loans)
• Minimum credit score: 660
• Acceptable collateral: Car or motorcycle
• Best for: Higher loan amounts

OneMain Financial

OneMain Financial offers smaller loan amounts and considers borrowers with fair credit scores.

• Loan amounts: $1,500 to $20,000
• Loan terms: 2 to 5 years
• Minimum credit score: None
• Acceptable collateral: Car, truck, motorcycle, boat, camper or RV
• Best for: Borrowers with little or no credit history

Upgrade

Upgrade offers longer loan terms and a lower minimum credit score requirement, making it a smart choice if your credit isn’t great and you want more time to repay your loan.

• Loan amounts: $1,000 to $50,000 ($3,005 minimum in GA; $6,005 minimum in MA)
• Loan terms: 2 to 7 years
• Minimum credit score: 560
• Acceptable collateral: Car
• Best for: Borrowers with fair to poor credit who want longer loan terms

Other lenders to consider

First Tech Federal Credit Union

First Tech offers some unique collateral options if you don't want to use your car or another type of vehicle to secure your personal loan.

• Loan amounts: $500 to $500,000 (depends on the type of collateral)
• Loan terms: 2 to 7 years
• Minimum credit score: Check with lender
• Acceptable collateral: First Tech Share Certificate (its version of a CD), stock or First Tech savings account
• Best for: Existing credit union members who want flexible collateral options

Oportun

Oportun secured personal loans are only available in three states, but residents can qualify for a loan even if they have a low credit score.

• Loan amounts: $2,525 to $20,000
• Loan terms: Check with lender
• Minimum credit score: None
• Acceptable collateral: Car
• Best for: Residents of California, Florida and Texas

Methodology

How to get a secured personal loan

You can find secured personal loans from banks, credit unions and online lenders. Applying for prequalification lets you see what rates you might qualify for, which won’t affect your credit score.

Once you’ve chosen a lender, complete its full application. You’ll be asked to provide details such as your name, address, Social Security number and proof of income. Lenders also typically ask you to indicate how you plan on using the loan funds and how much you want to borrow. You’ll need to specify what asset you’ll be using as collateral, such as a car, your home, money in a savings account or stocks (different lenders may have different requirements for collateral).

If you’re approved for a loan, you’ll receive a loan agreement that outlines your loan amount, monthly payment amount, annual percentage rate (APR) and loan term. Read through this document carefully before you sign.

You’ll typically receive your loan funds within one to seven business days (exact funding times will depend on your lender).

Pros and cons of secured personal loans

Like any financial product, secured personal loans come with benefits and drawbacks to consider:

Pros of secured personal loans

• More accessible — If you have poor or bad credit, a secured personal loan can help you qualify more easily. In many cases, the minimum credit score requirement is lower than for unsecured loans (if there’s a minimum at all).
• Potentially lower interest rates — Secured personal loans tend to have lower interest rates than unsecured loans. Putting up collateral allows you to save money on interest.
• Offered by many types of lenders — Banks, credit unions and online lenders offer secured personal loans. You can shop around to find the best option for your situation.
• Larger loan amounts — Unless you have a high income and excellent credit, it’s hard to qualify for large loan amounts for unsecured loans. Putting up collateral ensures the lender doesn’t face too much risk if you default on your payments, so lenders may be willing to lend you more.

Cons of secured personal loans

• Need to provide collateral — Putting up your car or savings account as collateral may give you pause, especially if you’re worried about keeping up with your loan payments.
• Maximum loan amount may be limited — Most lenders offer a loan amount that’s in line with the value of your collateral. For example, if your collateral is a savings account with $3,000 in it, a lender probably won’t loan you $15,000.
• Risk losing collateral — If you miss or are late on your monthly payments, you risk having the lender seize the asset you provided as collateral.
• Usually shorter repayment terms — Secured loans may not come with repayment terms as long as unsecured loans, which means your monthly payments could be higher and potentially stretch your budget too thin.

What to consider when comparing secured personal loans

When you’re looking for a secured personal loan, it’s a good idea to shop around to secure the rates and terms that best suit your needs. Compare the following features:

• Interest rate — The lower your interest rate, the more you’ll save over the life of your loan. Even a fraction of a percentage point can make a huge difference in how much you’ll pay.
• Loan term — Shorter loan terms means paying less interest overall, but you’ll likely have higher monthly payments. Longer loan terms usually come with more affordable monthly payments, but you’ll pay more interest over the life of the loan.
• Collateral — Check the fine print to see what the lender considers acceptable collateral. For example, if you’re putting up your vehicle, see whether you need to have it paid off, or if it has to be within a certain age.
• Monthly payment — Your monthly payment will be determined by your loan amount, interest rate and loan terms. Make sure your monthly payment will fit comfortably within your budget so that you don’t risk falling behind on payments.
• Fees — Some lenders charge application or origination fees when you take out a secured personal loan, which could eat into the loan funds you receive. You might also be charged fees for making late payments, and some lenders charge prepayment penalties for paying off your loan early.

Is a secured personal loan easier to qualify for than an unsecured personal loan?

A secured personal loan may be easier to qualify for because you’re putting up collateral. When you apply for a personal loan, the lender will look at your credit history, credit score, existing debt and income.

It’s riskier for lenders to approve borrowers with low credit scores for an unsecured personal loan because if you default, the lender can’t take your property to recoup its losses. But lenders may have more confidence when offering you a secured personal loan since they can take your collateral if you don’t make your payments.

Alternatives to secured personal loans

If a secured loan isn’t right for you, consider these alternatives:

• Credit card — Using a credit card could be a better alternative if you only need to borrow a small amount. Although credit card APRs are typically in the double digits, you don’t have to worry about interest if you pay your balance on time and in full each month. Some credit cards offer a 0% introductory APR, where you won’t accrue interest on purchases during a certain time frame. Plan carefully, though: If you’re still carrying a balance when the promotional period ends, you’ll start accruing interest at the card’s regular rate, which could be higher than a personal loan interest rate.
• Home equity loan or home equity line of credit (HELOC) — Home equity loans and HELOCS are technically secured loans. These financial products let you tap your home equity, which could allow you to borrow more money with a competitive rate. But you’ll need to have built up enough equity to qualify, and this type of loan uses your home as collateral. Before signing on the dotted line, make sure you understand the risks involved with this type of loan — the lender could take your home if you default on your payments.
• Unsecured personal loan — Unsecured personal loans may come with higher interest rates, but they might be a better option if you aren’t able to put up collateral. Some lenders offer unsecured loans for those with bad credit, so it can pay off to shop around and compare lenders.
• Loan from family or friends — Consider asking a trusted family member or friend for a loan if you’re in a bind. Keep in mind that you need to be clear how you plan to repay the loan, and you could risk ruining your relationship if you fail to make payments.