Frequently asked Questions
Is it easier to get secured personal loans?
Not only are secured personal loans easier to obtain compared to unsecured loans, you can also get a higher rate. This is because in the event of default on the loan, the lender can keep your collateral, whether it is backed by your car, savings account, certificate of deposit, or stock.
Do personal loans harm your credit history?
When you take out a personal loan for the first time, you may first see your credit drop. However, if you continue to make timely payments, your credit score usually increases. If you don’t have an established loan, getting a secured personal loan can show future lenders that you are reliable.
What is the interest rate for a personal loan?
Interest rates on personal loans vary greatly depending on many factors such as credit rating, payment history, debt, loan conditions and loan amount. These rates are usually between 3% and 36%. A secured loan may offer a lower interest rate because the lender is entitled to receive your collateral in the event of a default.
What alternatives are available to secured personal loans?
Instead of getting a secured personal loan, consider getting an unsecured personal loan. Your interest rates will be higher because there is no collateral to protect the lender in the event of a default. However, it also means you won’t lose your collateral, such as your home, stocks, CDs, or savings account.
Another alternative to a secured personal loan is a credit card. Interest rates will be higher, but some promotions offer starting interest rates from 0%. Or, bonus credit cards can help you earn cashback or travel rewards.
Does a secured loan increase credit?
A secured loan really helps create credit and many people get it for this purpose alone. Credit unions, in particular, love to advertise secured loans in order to get credit as a way of teaching financial literacy. A member can deposit a certain amount of money into a savings account and use it as collateral for a personal loan. Each payment made is reported to the credit bureaus.
It is important to make all payments on a secured loan on time, otherwise you could lose collateral and damage your credit rating.
Can you repay your secured loan early?
Yes, you can repay your secured loan ahead of schedule. The vast majority of lenders also do not charge prepayment penalties. However, if you are using a secured loan to help build your personal or business loan, it might be worth taking your time to keep making payments even if you can pay off early.
You may want to consider repaying a loan creation loan early if your debt-to-income ratio (DTI) is too high to meet the requirements of another specific loan. For example, with your personal loan, your DTI may be too high to qualify for a car loan, and you will have to repay that loan creation loan ahead of schedule in order to lower the ratio to qualify.
How we choose the most secured personal loans
We’ve looked at the 27 most affordable secured personal loans and narrowed them down to the top six based on a few specifics and considerations. We looked at rates, credit rating requirements, reviews, loan amounts and repayment terms. Another important factor in choosing the best loan options is fees – some lenders charge fees for registration, application and annual fees. Some lenders even charge a penalty for early repayment of the loan.