5 Assets You Can Definitely Use for Secured Loan Collateral

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How Student Loan Hero Gets Paid

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There may come a time when you may not qualify for regular, unsecured personal loans. That’s when you’ll most likely turn to secured ones.

Secured loans, sometimes called collateral loans, are backed by a borrower’s asset. This acts as collateral that the lender can claim if you default on your loan.

Having collateral assets in the mix makes secured loans a safer bet for the lender. Which, in turn, can have a few benefits for you, the borrower.

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Benefits (and barriers) to getting a secured loan

The first major benefit of a secured loan is easier approval.

Collateral loans already have a way for lenders to assure they’ll get their money back. Therefore, credit and lending requirements are usually more relaxed on a secured personal loan.

This makes it possible to get a personal loan with bad credit. So long as you’re willing to offer up some collateral.

Another major benefit of secured loans is lower personal loan rates. The lower risk associated with a secured loan often results in a lower interest rate than an unsecured personal loan would carry.

A lower interest rate offers big savings in the long-run. Not only with lower monthly payments, but also less total interest paid over the life of the loan.

However, the offset of these secured loan pros is that a borrower will need to use an asset as collateral. This creates an initial barrier to borrowing because a borrower has to own something that can be used as collateral.

So what can actually be used as collateral for a secured personal loan?

Here are some assets you might have that could qualify you to borrow with collateral loans.

1. House or home equity collateral loans

A home or real estate property is one of the most common forms of collateral for secured loans.

For example, mortgages are set up as loans secured by the property. That’s why a bank can foreclose on a homeowner who has defaulted on a mortgage.

A mortgage isn’t the only secured loan that can use a home as collateral, however.

A second mortgage can be taken out on top of a first mortgage as a way to borrow against a home’s equity. And a home equity loan is a type of personal loan secured, as indicated in its name, by the home’s equity.

Of course, your home is also one of your most important assets. And you should fiercely protect it.

With collateral loans secured by your home, it’s especially important to borrow wisely. That’s why you should make sure your payments will be affordable. If you can’t make payments, you risk losing the equity you’ve built up. Or even your home.

The Federal Trade Commission (FTC) even recommends that you shop around for the best APRs and loan terms prior to getting a home equity loan.

Also, watch out for signs of predatory lending around home equity loans. These include lenders using high-pressure sales tactics, failing to disclose details, or refusing to let you review or keep copies of the forms you’ve signed.

2. Secured car loans

Another common form of secured loan collateral is a car or other vehicle. Most auto loans used to purchase a car are secured by the vehicle’s value, often estimated by Kelley Blue Book.

But if you own a car, vehicle, or even a boat, you can often use that as collateral for a secured personal loan or auto equity loan.

Just make sure you are getting a secured installment loan from a reputable lender. Many major banks and credit unions offer car equity loans or similarly secured car loans at affordable terms.

But try and avoid car title loans. These usually have high APRs (think 100% or higher according to the FTC) and short repayment periods of 15 to 30 days. The combination of high fees and short repayment periods make these a very high-cost way to borrow.

3. Your investments as collateral for a loan

Stocks or other investments can also be used to get a secured personal loan.

Loans that use investments as collateral are often called securities-based loans or stock-based loans. These are often offered by investment brokerages or private banks to clients who already have investments with these companies.

These are set up similarly to other collateral loans. The borrower’s stock holdings or other investments are used as collateral against the loan. Usually, a lender will extend credit up to the full amount of the investment portfolio’s value.

However, the value of a portfolio can fluctuate with the market. This could cause problems with this type of loan.

For example, if the value of the investments dip below what you owe, your lender could call the loan in and demand extra cash to make up the difference.

Therefore, make sure you understand the terms of a security-based loan to protect your investments.

Lastly, not all investments can be used for securities-based loans. Retirement accounts like 401ks and IRAS, for example, usually can’t be used as collateral for secured loans.

4. Savings-secured loans

Some banks will also offer savings-secured or certificate-secured loans. These are typically offered by banks and credit unions to existing customers.

Savings-secured loans allow borrowers to keep their liquid cash in a deposit account, usually a savings account or certificate of deposit, while also getting a loan to fund something they need.

The best part is borrowers can usually earn interest on their deposits while using them as collateral for a secured loan.

However, the deposit will usually accrue interest at a much lower rate than the borrower will pay on the loan. So it might actually be more advantageous to simply pull out your cash to pay for expenses, rather than borrow.

On the other hand, a savings-secured loan can be a smart tool to build credit.

It’s also usually much easier to qualify for these loans. So even those with bad credit can get these personal loans. As your repay it responsibly it can help repair your credit and give you a better credit mix.

5. Secure a loan with future paychecks

It’s also possible to use your future income to secure a cash-advance loan. With these types of loans, you borrow money now with the agreement that you’ll pay it back when you get a paycheck.

Don’t confuse legitimate cash-advance loans with payday loans, however. The latter often carries high APRs and employs harmful lending practices that make them a very costly way to borrow.

Many lenders, banks, and credit unions offer legitimate cash-advance or salary-advance loan options. Yet, even with a legitimate lender, repayment is usually required very quickly — upon receipt of your next paycheck.

However, this could be a decent option for certain situations. Like funding a move to start a new job or filling in gaps irregular paychecks.

Think Twice About Using Collateral for a Secured Loan

If you have any of the above assets, you could use it to get a secured personal loan.

But remember, borrowing with collateral loans will require extra diligence on your part to ensure loans are affordable. And, that you never miss a payment.

Also, keep in mind that some kinds of secured loans are riskier than others. So make sure you shop around, do your research, and responsibly repay secured loans to avoid losing your collateral asset.

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How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Student Loan Hero is an advertising-supported comparison service. The site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

How Student Loan Hero Gets Paid

How Student Loan Hero Gets Paid

Student Loan Hero is compensated by companies on this site and this compensation may impact how and where offers appear on this site (such as the order). Student Loan Hero does not include all lenders, savings products, or loan options available in the marketplace.

Advertiser Disclosure

Student Loan Hero Advertiser Disclosure

Student Loan Hero is an advertising-supported comparison service. The site features products from our partners as well as institutions which are not advertising partners. While we make an effort to include the best deals available to the general public, we make no warranty that such information represents all available products.

RATES (APR)loan amount
5.99% – 18.85%1 $5,000 to $100,000
6.46% – 35.99% $1,000 to $50,000
5.94% – 35.97%* $1,000 to $50,000
99.00% – 199.00%2 $500 to $4,000
5.99% – 24.99%3 $5,000 to $40,000
7.99% – 29.99%4 $7,500 to $40,000
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1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Fixed rates from 5.99% APR to 18.85% APR (with AutoPay). SoFi rate ranges are current as of March 19, 2020 and are subject to change without notice. Not all rates and amounts available in all states. See Personal Loan eligibility details. Not all applicants qualify for the lowest rate. If approved for a loan, to qualify for the lowest rate, you must have a responsible financial history and meet other conditions. Your actual rate will be within the range of rates listed above and will depend on a variety of factors, including evaluation of your creditworthiness, years of professional experience, income and other factors. See APR examples and terms. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account.
  2. To check the rates and terms you qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull.
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  3. Minimum Credit Score: Not all applicants who meet SoFi’s minimum credit score requirements are approved for a personal loan. In addition to meeting SoFi’s minimum eligibility criteria, applicants must also meet other credit and underwriting requirements to qualify.
  4. If you lose your job through no fault of your own, you may apply for Unemployment Protection. SoFi will suspend your monthly SoFi loan payments and provide job placement assistance during your forbearance period. Interest will continue to accrue and will be added to your principal balance at the end of each forbearance period, to the extent permitted by applicable law. Benefits are offered in three month increments, and capped at 12 months, in aggregate, over the life of the loan. To be eligible for this assistance you must provide proof that you have applied for and are eligible for unemployment compensation, and you must actively work with our Career Advisory Group to look for new employment. If the loan is co-signed the unemployment protection applies where both the borrower and cosigner lose their job and meet conditions.
  5. Terms and Conditions Apply: SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet SoFi’s underwriting requirements. Not all borrowers receive the lowest rate. To qualify for the lowest rate, you must have a responsible financial history and meet other conditions. If approved, your actual rate will be within the range of rates listed above and will depend on a variety of factors, including term of loan, a responsible financial history, years of experience, income and other factors. Rates and Terms are subject to change at anytime without notice and are subject to state restrictions. SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. Licensed by the Department of Business Oversight under the California Financing Law License No. 6054612. SoFi loans are originated by SoFi Lending Corp., NMLS # 1121636. (www.nmlsconsumeraccess.org)
2 Includes AutoPay discount. Important Disclosures for Opploans.

Opploans Disclosures

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Opploans currently operates in these states: . *Approval may take longer if additional verification documents are requested. Not all loan requests are approved. Approval and loan terms vary based on credit determination and state law. Applications processed and approved before 7:30 p.m. ET Monday-Friday are typically funded the next business day.

  1. To qualify, a borrower must (i) be a U.S. citizen or permanent resident; (ii) reside in a state where OppLoans operates; (iii) have direct deposit; (iv) meet income requirements; (v) be 18 years of age (19 in Alabama); and, (vi) meet verification standards.
  2. NV Residents: The use of high-interest loans services should be used for short-term financial needs only and not as a long-term financial solution. Customers with credit difficulties should seek credit counseling before entering into any loan transaction.

  3. OppLoans performs no credit checks through the three major credit bureaus Experian, Equifax, or TransUnion. Applicants’ credit scores are provided by Clarity Services, Inc., a credit reporting agency.

  4. Based on customer service ratings on Google and Facebook. Testimonials reflect the individual’s opinion and may not be illustrative of all individual experiences with OppLoans. Check loan reviews.

  5.  

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3 Includes AutoPay discount. Important Disclosures for Payoff.

Payoff Disclosures

  1. All loans are subject to credit review and approval. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history. Currently loans are not offered in: MA, MS, NE, NV, OH, and WV.
4 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. The loan terms presented are not guaranteed and APRs presented are estimates only. To obtain a loan you must submit additional information and documentation and all loans are subject to credit review and our approval process. The range of APRs is 7.99% to 29.99% and your actual APR will depend upon factors including your credit score, usage and history, the requested loan amount, the stated loan purpose, and the term of the requested loan. To qualify for a 7.99% APR loan, a borrower will need excellent credit on a loan for an amount less than $12,000.00, and with a term equal to 24 months. Adding a co-borrower with sufficient income; using at least eighty-five percent (85%) of the loan proceeds to directly pay off qualifying existing debt; or showing proof of sufficient retirement savings, could help you also qualify for the lowest rate available. All loans are made by Cross River Bank and MetaBank®, N.A., Members FDIC.
* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

Personal loans made through Upgrade feature APRs of 5.94%-35.97%. All personal loans have a 2.9% to 8% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For example, if you receive a $10,000 loan with a 36-month term and a 17.98% APR (which includes a 14.32% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 in your account and would have a required monthly payment of $343.33. Over the life of the loan, your payments would total $12,359.97. The APR on your loan may be higher or lower and your loan offers may not have multiple term lengths available. Actual rate depends on credit score, credit usage history, loan term, and other factors. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. There is no fee or penalty for repaying a loan early. Accept your loan offer and your funds will be sent to your bank or designated account within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes the transaction. From the time of approval, funds should be available within four (4) business days. Funds sent directly to pay off your creditors may take up to 2 weeks to clear, depending on the creditor. Personal loans issued by Upgrade’s lending partners. Information on Upgrade’s lending partners can be found at https://www.upgrade.com/lending-partners/.