7 Secured Loans From Banks, Online Lenders and Credit Unions
While personal loans are typically unsecured, secured personal loans let you borrow money against an asset you own, such as a car or funds in your savings account. When you take out a secured loan, you’ll receive a lump sum of cash which you’ll repay in equal monthly installments. But if you can’t repay the loan, you risk losing the asset you put up as collateral.
Finding a personal loan with collateral can be difficult, since they’re not offered by all financial institutions. See a list of lending platforms and lenders that offer secured loans below.
Best secured personal loans
|Lender||Best for…||APR rate||Loan term||Loan amount||Accepted collateral|
|Digital Federal Credit Union (DCU)||No origination fees||From 10.99%||Up to 12 to 60 months||Not specified||DCU savings account|
|First Technology Federal Credit Union||In-person banking||Starting at 8.99%||24 to 84 months||$500 to $500,000||First Tech CD or savings account|
|KeyBank||Longer term loans||7.99%- 13.49%||Up to 84 months||$5,000 and up||KeyBank CD, savings or investment account|
|Municipal Credit Union||Debt consolidation||8.20%-12.95%||12 to 72 months||$500 and up||MCU CD or share account|
|OneMain Financial||Bad or fair credit||18.00%- 35.99%||24 to 60 months||$1,500 to $20,000||Motor vehicle|
|Regions Bank||Small loans||4.74%- 16.49%||12 to 60 months||$2,000+ for CD secured; $250+ for savings/money market secured||Regions Bank CD, savings account or money market account|
|Upgrade||Quick funding||8.49%- 35.99%||24 to 84 months||Up to $50,000||Cars that are 20 years old or newer|
What is a secured personal loan? The basics
Personal loans are lump-sum loans that are repaid in equal monthly installments with fixed APRs over a set period of time, typically a few years. While personal loans are typically unsecured, meaning they don’t require collateral, secured personal loans are an option.
Secured personal loans require the borrower to put down an asset as collateral, such as a vehicle or savings account, to back the loan. If the loan is not repaid, the lender may choose to seize the collateral in order to recover the money they lost. Borrowers with subprime credit may find it easier to qualify for a secured loan, because they assume more of the risk since their asset is on the line.
Pros and cons of secured personal loans
Consistent repayment schedule. APRs and monthly payments are fixed.
Better terms. You may qualify for a loan with a lower APR by putting up collateral.
Expanded qualification. It is easier for borrowers with less-than-stellar credit to get a secured loan than an unsecured loan.
Inherent risk. You may lose your collateral if you fail to repay the loan.
Fees and penalties. A loan origination fee is typically 1%-8% of the cost of the loan.
Not available everywhere. Not all lenders offer secured personal loans, and collateral requirements vary.
What you can use as collateral for a secured loan
To qualify for a secured loan, you’ll need to put down valuable collateral to lower your risk as a borrower. Here’s the type of collateral you can put down for a secured loan.
Secured personal loans with a car as collateral
If you need cash but don’t have the credit score necessary to qualify for an unsecured form of financing — or you’re seeking better terms — you could potentially tap the equity you have in your vehicle. Using your car as collateral for a personal loan may help you meet the eligibility requirements or qualify for a lower interest rate.
You may be able to use your car as collateral if:
- You own the car outright and are not making payments on a lease or auto loan.
- The car is registered to you.
- The car has a clean title.
- The car is insured.
- There might also be restrictions on the vehicle’s make, model, age and mileage.
The biggest drawback to this type of loan is that your car can be repossessed if you don’t repay the loan, leaving you without essential transportation. It’s important to estimate your monthly payments and make sure a secured loan fits into your budget before you sign the dotted line.
CD-secured loans and savings account loans
Some banks and lenders let you borrow money using your savings account or certificates of deposit (CDs) as collateral. You can typically borrow up to the amount of money you have invested in the bank, and the loan is issued at a low interest rate.
Loans that are secured by a savings account are sometimes known as credit builder loans, as they can help borrowers with bad credit to improve their credit score. However, these loans are not a good choice for borrowers who just need money to cover an emergency expense. After all, if you already have money in your savings account, you can just use those funds to cover the expense rather than taking out an interest-bearing loan.
On the other hand, borrowing a loan that’s secured against your CD may make sense if you need fast access to cash you’ve invested. Dipping into your CD before the term expires can incur an early withdrawal penalty, but CD-secured loans let you access the money that’s tied up in the CD without being penalized.
Where to find a secured personal loan
Credit unions are nonprofit and member-owned, so they may be able to extend their offerings to members with a less established credit history.
Many credit unions offer savings account loans and CD-secured loans. You may also be able to use an asset such as your vehicle as collateral, depending on what credit union personal loans are offered at your local branch. Just be sure to do your research and compare potential offers across multiple lenders before getting a loan from a credit union.
While many larger banks, like Wells Fargo, do not offer secured loans, many smaller banks like KeyBank and Regions Bank do. Oftentimes, bank lenders require that you use a certificate of deposit (CD), savings or investment account to secure your loan, though, depending on the bank, the institution may also allow you to use your vehicle as collateral. A bank may also require you to come in person to sign for a secured loan.
Trustworthy online lenders, like Upgrade, will typically offer you a loan based on your credit score, credit history and the value of your collateral. However, some online lenders will consider other factors as well, like your education level and employment. Many online lenders have an APR rate that is capped at about 36%, so you won’t get saddled with skyrocketing rates like with payday loans.
These types of lenders typically allow borrowers to see if they prequalify for a loan without dinging their credit score, so be sure to compare lenders and rates before signing up with the first lender that approves you.
How to get a secured personal loan
While each lender is different, lenders typically follow similar processes for how consumers can apply for a loan. Here’s what you need to do to get a secured personal loan.
- Check the collateral criteria. Many lenders that offer secured loans will have eligibility standards for what they’ll accept as collateral.
- Compare the rates and terms of multiple lenders. Check to see what lenders offer prequalification, or soft credit checks, so you can see where you stand without hurting your credit score. Be sure to compare factors such as APR rates, repayment terms, how much you can borrow, how quickly you’ll receive your funds and any fees.
- Gather necessary documents. A lender may require that you provide documentation before approving you for a secured loan. To qualify, you may have to demonstrate your income, like with W-2 paperwork, as well as prove your identity with a government-issued identification. When taking out a secured loan, you may also need to provide documentation on the collateral you’re offering up. For example, if you’re using your vehicle to secure a loan, you may have to provide the title, registration and insurance documents.
- Once you’re approved, wait for funding. The time it takes for a lender to approve a borrower can take anywhere from a few minutes to a few days. The same goes for how long it takes for a lender to deposit funds for your loan into your account. This can happen on the same business day, or the day after you’re approved, and up to several business days after approval. If you need money quickly, be sure to check with lenders you’re considering as to how long the loan approval and funding process takes.
Alternatives to secured personal loans
Cosigner or joint application
If you don’t want to put down collateral for a personal loan, you can instead opt to sign with a cosigner. A cosigner is an individual, typically a family member or friend, with a good credit score that is willing to sign with you when you take out a loan. This individual’s good credit score can make it easier for you to qualify for a loan. However, a cosigner must take equal responsibility for a loan if you’re not able to make repayments, so you’ll want to make sure your cosigner is aware of the risk.
A credit card with a low rate or even a 0% intro APR can be another feasible alternative to secured loans. Because most credit cards are unsecured, you won’t have to worry about losing the collateral you put down should you find yourself unable to make loan payments. Be sure to compare your credit card’s details like APR rate and compare them to any secured personal loan offers you receive.
Unsecured personal loan
Unsecured loans, unlike secured loans, do not require collateral.
Because this means a lender is taking on more of a risk by lending to you, this can make obtaining a personal loan more difficult if you do not meet the credit requirements of a lender. However, there are lenders willing to work with consumers who have bad credit.
Keep in mind that an unsecured loan may also have higher APR rates than a secured loan because the lender is taking on a greater risk by lending to borrowers with subprime credit.
Secured personal loans FAQ
Is a secured loan a good idea?
A secured loan may be a good idea if you have less than stellar credit and you’re having a difficult time qualifying for a loan any other way. By putting down collateral on your loan, your lender is taking on less risk by allowing you to borrow from their institution. However, the downside to secured personal loans is that you will have to forfeit that collateral if you’re unable to finish paying the loan off, so be sure to make sure you’re in a financial position where you can do that.
Are secured loans easier to get than unsecured loans?
Secured personal loans can be easier to obtain than unsecured loans if you have bad or fair credit. However, you’ll need to check the lender’s criteria on what you can use to secure your loan. For example, Upgrade requires that vehicles used as collateral be less than 20 years old.
By offering a full picture of each lender’s rates and terms, LendingTree’s goal is to provide you with the information you need to make a financially sound decision that works best with your unique situation. Our team of experts thoroughly vets and weighs each option — recommendations are not based on advertisers but rather an objective review of each lender’s offerings. Lenders were chosen based on the following factors:
- Types of collateral
- APR rates
- Loan amounts
- Transparency of criteria