Secured personal loans let borrowers pledge collateral in order to borrow money. The best secured loans have low minimum credit score requirements that help you qualify and get the money you need.
This service is free and will not affect your credit score.
OneMain prioritizes a borrower’s ability to repay on a loan application. Rates are high, but this lender provides fast funding to borrowers with low credit scores. Read our review of OneMain Financial
Upstart personal loans offer fast funding and may be an option for borrowers with low credit scores or thin credit histories. Upstart is a solid financing choice for large purchases. Read our review of Upstart
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Note that the information for each lender is specific to its unsecured loans. Qualification criteria and loan details may differ for secured loans.
What to know about secured personal loans
A secured personal loan is a loan you get by providing something you own, typically a vehicle or savings account, in exchange for borrowed money that you repay over time. If you fail to repay the funds, the lender can take your collateral in lieu of repayments.
Secured loan amounts are typically from a few hundred dollars to $50,000 and may be tied to the value of your collateral. Annual percentage rates are from 6% to 36% and repayment terms are from one to seven years.
To get a secured loan, your collateral must meet a lender’s requirements. For example, you usually have to own your car to get an auto-secured personal loan. A lender may require that your pledged investment or savings account have a certain dollar value. Typically, the collateral’s value must be equal to or greater than the loan amount.
Like an unsecured loan, your credit, income and other debts are central to getting approved for a secured loan, but offering collateral lowers the risk to the lender. In turn, approval odds can be better for secured loans, and the rate is typically lower.
If you qualify, the lender will place a lien on your collateral, which may give them the right to take it if you fail to repay the loan.
Secured loans are typically repaid in equal monthly installments, and most lenders report payments to the three major credit bureaus — Equifax, Experian and TransUnion. This means if you stop making payments, you risk losing the collateral and your credit score will likely drop.
Once the loan is repaid, the lender no longer has the right to take your collateral.
Other types of secured loans
Home equity loans and HELOCs
A home equity loan or line of credit is a second mortgage that lets you access cash based on the value of your home. As with the initial mortgage, a lender can take your house if you don’t repay.
With an auto-secured loan, the lender considers information like the car’s make, model and year — in addition to your credit and finances — to decide your rate. If approved, you send the lender your title and they return it once the loan is paid off. These are different from auto title loans, which can have triple-digit APRs (more on those below).
CD loans
If you have a certificate of deposit with a bank, you may be able to use it as collateral for a personal loan. Rates are usually low on CD loans — typically starting a couple of percentage points above the CD rate — and it’s one way to access funds without withdrawing the CD early and paying a penalty.
401(k) loans
An employer-sponsored 401(k) plan may allow employees to borrow from their retirement account for up to five years. Rates are usually low on 401(k) loans, but by borrowing from the account, you’re missing out on market gains and compound interest from your retirement savings.
Pawn loans
Pawnshops let you hand over valuables in exchange for cash that you must typically pay back within a couple of weeks. Short repayment terms and APRs up to 200% may make pawn loans difficult to repay. If you fail to repay this loan, the pawnshop will keep your item.
Car title loans
These are high-interest, short-term loans of usually a few hundred or thousand dollars. Because they’re often difficult to repay on time, car title loans can encourage repeat borrowing, which can lead you into a debt cycle. Avoid auto-secured loans with rates above 36%, which is the highest rate consumer advocates say an affordable loan can have.
Pros and cons of secured loans
Weigh the benefits of getting a secured loan against the potential drawbacks before you borrow.
Pros
Better approval odds.
Lower interest rates and higher loan amounts.
Cons
The lender could take your collateral.
Not as widely available as unsecured loans.
Pros
Better approval odds. Adding collateral lowers the risk to the lender, so secured loan applications are more likely to be approved than unsecured loan applications
Lower interest rates and higher loan amounts. When lenders view loans as less risky, they may be more likely to approve borrowers at lower APRs or lend more money.
Cons
The lender could take your collateral. If your car is collateral for a loan and you need it to get to work, for example, losing it could put you in a worse situation than before you borrowed.
Not as widely available as unsecured loans. Many banks, credit unions and online lenders offer only unsecured loans.
Where to get a secured personal loan
Banks: Secured loans from banks are usually backed by a savings or CD account you already have with the bank. You can’t access that money until the loan is repaid.
Credit unions: Some credit unions offer share-secured loans, which is another term for savings-secured loans. The credit union will hold onto your savings while you repay the loan.
If your credit union doesn’t offer these but your credit score is somewhat low, you may still qualify for an unsecured loan, because credit unions are known to have softer borrower requirements and lower APRs than other types of lenders.
Online lenders: Most online lenders that provide secured loans require a vehicle as collateral. Some let you apply for this loan upfront, but others may show you the option only after you’ve tried applying for an unsecured loan.
Many lenders let you pre-qualify to check your rate on an unsecured loan without affecting your credit, which may help you decide between secured and unsecured loans.
How to get a secured loan
The process for getting a secured loan can vary based on the type of collateral you’re using, but here are some of the steps you’ll take:
Inquire about the loan. Some lenders offer secured loans only after an applicant does not pre-qualify for an unsecured loan. If you can’t pre-qualify with the lender, or you don’t see a secured loan option, ask the lender directly about secured loans.
Check your budget. Review your cash flow to find out how much you can afford to pay toward the loan each month. Use a personal loan calculator to see what APR, loan amount and repayment term you’d need to keep monthly payments affordable.
Choose a lender. Compare lenders to see what kind of collateral they accept and what rates they offer.
Gather documents. Before you apply, gather the documents most lenders require for an application. These can include a government-issued ID, bank statements, W-2s and pay stubs. You may also need documents for the collateral, such as a car title.
Apply. Most lenders have online applications. Once you submit, an approval decision may take a couple of days or longer if a lender has to assess the collateral’s value.
If you have bad credit (a score in the high 500s or lower), here are a few tips to prepare for a secured loan application.
Review your credit and debts. Pull your credit reports to see what a lender will see when evaluating your application, including any delinquencies or errors, and find opportunities to build your credit before applying. You can get free credit reports through NerdWallet or at AnnualCreditReport.com.
Check your finances. Review your income, including any non-employment income sources the lender may accept, like alimony and child support. Then, calculate your debt-to-income ratio, which is the percent of your monthly income that goes toward debt payments. If your DTI is high, consider paying down other debts before applying.
Assess the value of your collateral. Check the collateral’s value to get an idea of the loan amount you may qualify for. If you’re using a bank or investment account to secure the loan, review the balance and past statements. To determine the value of your car, use a pricing guide such as Edmunds or Kelley Blue Book.
Alternatives to secured personal loans
Because secured loans require you to risk a car or savings account — and because they’re somewhat rare — it’s a good idea to compare other options before you borrow.
Alternatives for bad credit
Bad-credit unsecured loans: Before you pledge collateral on a secured loan, check to see if you qualify for an unsecured loan. Some online lenders tailor their personal loans to bad-credit borrowers, and let you pre-qualify with a soft credit check to preview your rate and loan amount.
Family loan: A trusted friend or family member may lend you necessary funds and charge little or no interest, if you’re comfortable asking.
Other ways to make money: A side gig could provide a one-time cash influx or a steady supplement to any other full- or part-time work.
Alternatives that build credit
Secured credit card: With a secured card, you put down a deposit for the lender to hold while you make purchases and pay them off. In exchange the lender reports the payments to the credit bureaus, helping to build your score.
Credit-builder loan: A credit-builder loan is a tool that helps borrowers build credit history but doesn’t provide any short-term cash. With this type of loan, the lender holds the loan amount in a bank account while you make payments. The lender reports your payments to the credit bureaus, and once you’ve repaid the full loan amount, the funds are released to you.
Emergency alternatives
Local financial assistance programs: A local church or community organization may provide free food, help with rent and utility bills or transportation to job interviews. Call 2-1-1 from any phone in the U.S. or visit 211.org.
Medical bill assistance: For help with medical bills, consider asking your physician’s office to set up a no-interest payment plan, try to negotiate for a lower bill or work with a medical bill advocate.
Is a secured loan easier to get than an unsecured loan?
Secured loans may be easier to get than unsecured loans because they're less risky for lenders. Borrowers with fair and bad credit may have a better chance of qualifying.
Do secured personal loans have lower interest rates than unsecured loans?
Secured loans can have lower rates than unsecured loans because the lender can take your collateral if you fail to repay, which makes it less risky for the lender.
What happens if you don’t repay a secured loan?
If you miss too many secured loan payments, the lender can take the collateral you pledged for the loan. This may be the funds in a savings account or your vehicle.
