5 Assets You Can Definitely Use for Secured Loan Collateral

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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.

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.

Interested in a personal loan?

Here are the top personal loan lenders of 2018!
LenderAPR RangeLoan Amount 
1 Includes AutoPay discount. Important Disclosures for SoFi.

SoFi Disclosures

  1. Personal Loans: Fixed rates from 6.990% APR to 14.865% APR (with AutoPay). Variable rates from 6.255% APR to 12.555% APR (with AutoPay). SoFi rate ranges are current as of September 1, 2018 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 credit worthiness, years of professional experience, income and other factors. See APR examples and terms. Interest rates on variable rate loans are capped at 14.95%. Lowest variable rate of 6.255% APR assumes current index rate derived from the 1-month LIBOR of 2.08% plus 4.425% margin minus 0.25% AutoPay discount. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. 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.

    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.See Consumer Licenses.
  2. 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.
  3. SoFi Personal Loans are not available to residents of MS. Maximum interest rate on loans for residents of AK and WY is 9.99% APR, for residents of IL with loans over $40,000 is 8.99% APR, for residents of TX is 9.99% APR on terms greater than 5 years, for residents of CO, CT, HI, VA, SC is 11.99% APR, and for residents of ME is 12.24% APR. Personal loans not available to residents of MI who already have a student loan with SoFi. Personal Loans minimum loan amount is $5,000. Residents of AZ, MA, and NH have a minimum loan amount of $10,001. Residents of KY have a minimum loan amount of $15,001. Residents of PA have a minimum loan amount of $25,001. Variable rates not available to residents of AK, TX, VA, WY, or for residents of IL for loans greater than $40,000.
  4. 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 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.

3 Important Disclosures for FreedomPlus.

FreedomPlus Disclosures

  1. All loans available through FreedomPlus.com are made by Cross River Bank, a New Jersey State Chartered Commercial Bank, Member FDIC, Equal Housing Lender. All loan and rate terms are subject to eligibility restrictions, application review, credit score, loan amount, loan term, lender approval, and credit usage and history. Eligibility for a loan is not guaranteed. Loans are not available to residents of all states – please call a FreedomPlus representative for further details. The following limitations, in addition to others, shall apply: FreedomPlus does not arrange loans in: (i) Arizona under $10,500; (ii) Massachusetts under $6,500, (iii) Ohio under $5,500, and (iv) Georgia under $3,500. Repayment periods range from 24 to 60 months. The range of APRs on loans made available through FreedomPlus is 4.99% to a maximum of 29.99%. APR. The APR calculation includes all applicable fees, including the loan origination fee. For Example, a four year $20,000 loan with an interest rate of 15.49% and corresponding APR of 18.34% would have an estimated monthly payment of $561.60 and a total cost payable of $7,948.13. To qualify for a 4.99% APR loan, a borrower will need excellent credit on a loan of $15,000 with a term of 24 months, and qualify for at least two of the following discounts: (1) add a co-borrower who has sufficient income; (2) use at least fifty percent of the loan proceeds to directly pay off existing debt; or (3) show proof of having at least forty-thousand dollars in retirement savings – contact FreedomPlus for further details.

4 Important Disclosures for Citizens Bank.

Citizens Bank Disclosures

  1. Personal Loan Rate DisclosureFixed interest rates from 6.49% – 19.49% (6.49% – 19.49% APR) based on applicable terms. Lowest rates range from 5.99%-18.99% (5.99%-18.99% APR), are for eligible applicants, require a 3-year repayment term, and include our Loyalty and Automatic Payment Discounts of 0.25 percentage points each, as outlined in the Loyalty Discount and Automatic Payment Discount disclosures. Subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.
  2. Loyalty Discount: The borrower will be eligible for a 0.25 percentage point interest rate reduction on their loan if the borrower has a qualifying account in existence with us at the time the borrower has submitted a completed application authorizing us to review their credit request for the loan. The following are qualifying accounts: any checking account, savings account, money market account, certificate of deposit, automobile loan, home equity loan, home equity line of credit, mortgage, credit card account, student loans or other personal loans owned by Citizens Bank, N.A. Please note, our checking and savings account options are only available in the following states: CT, DE, MA, MI, NH, NJ, NY, OH, PA, RI and VT. This discount will be reflected in the interest rate and Annual Percentage Rate (APR) disclosed in the Truth-In-Lending Disclosure that will be provided to the borrower once the loan is approved. Limit of one Loyalty Discount per loan, and discount will not be applied to prior loans. The Loyalty Discount will remain in effect for the life of the loan.
  3. Automatic Payment Discount: Borrowers will be eligible to receive a 0.25 percentage point interest rate reduction on their Citizens Bank Personal Loan during such time as payments are required to be made and our loan servicer is authorized to automatically deduct payments each month from any bank account the borrower designates. If our loan servicer is unable to successfully withdraw the automatic deductions from the designated account two or more times within any 12-month period, the borrower will no longer be eligible for this discount.

5 Important Disclosures for LendingPoint.

LendingPoint Disclosures

  • Loan approval is not guaranteed. Actual loan offers and loan amounts, terms and annual percentage rates (“APR”) may vary based upon LendingPoint’s proprietary scoring and underwriting system’s review of your credit, financial condition, other factors, and supporting documents or information you provide. Origination or other fees from 0% to 6% may apply depending upon your state of residence. Upon LendingPoint’s final underwriting approval to fund a loan, said funds are often sent via ACH the next non-holiday business day. LendingPoint makes loan offers from $2,000 to $25,000, at rates ranging from a low of 15.49% APR to a high of 34.49% APR, with terms from 24 to 48 months. The loan offer(s) shown reflect a 28 day payment cycle which is being offered as a courtesy as many of our customers are paid on a biweekly schedule and thus this may better align the loan payment dates with your actual income receipt schedule.

6 Important Disclosures for LendingClub.

LendingClub Disclosures

All loans made by WebBank, Member FDIC. Your actual rate depends upon credit score, loan amount, loan term, and credit usage & history. The APR ranges from 6.95% to 35.89%*. The origination fee ranges from 1% to 6% of the original principal balance and is deducted from your loan proceeds. For example, you could receive a loan of $6,000 with an interest rate of 7.99% and a 5.00% origination fee of $300 for an APR of 11.51%. In this example, you will receive $5,700 and will make 36 monthly payments of $187.99. The total amount repayable will be $6,767.64. Your APR will be determined based on your credit at the time of application. The average origination fee is 5.49% as of Q1 2017. In Georgia, the minimum loan amount is $3,025. In Massachusetts, the minimum loan amount is $6,025 if your APR is greater than 12%. There is no down payment and there is never a prepayment penalty. Closing of your loan is contingent upon your agreement of all the required agreements and disclosures on the www.lendingclub.com website. All loans via LendingClub have a minimum repayment term of 36 months. Borrower must be a U.S. citizen, permanent resident or be in the United States on a valid long term visa and at least 18 years old. Valid bank account and Social Security number are required. Equal Housing Lender. All loans are subject to credit approval. LendingClub’s physical address is: LendingClub, 71 Stevenson Street, Suite 1000, San Francisco, CA 94105.

†Per reviews collected and authenticated by Bazaarvoice in compliance with the Bazaarvoice Authentication Requirements, supported by anti-fraud technology and human analysis. All reviews can be reviewed at reviews.lendingclub.com

**Based on approximately 60% of borrowers who received offers through LendingClub’s marketing partners between January 1, 2018 to July 20,2018. The time it will take to fund your loan may vary.


7 Important Disclosures for Earnest.

Earnest Disclosures

  1. Earnest does not lend in Alabama, Delaware, Kentucky, Nevada, or Rhode Island.

8 Important Disclosures for Avant.

Avant Disclosures

* The actual rate and loan amount that a customer qualifies for may vary based on credit determination and other factors. Funds are generally deposited via ACH for delivery next business day if approved by 4:30pm CT Monday-Friday. Avant branded credit products are issued by WebBank, member FDIC.

** Example: A $5,700 loan with an administration fee of 4.75% and an amount financed of $5,429.25, repayable in 36 monthly installments, would have an APR of 29.95% and monthly payments of $230.33


* Important Disclosures for Upgrade Bank.

Upgrade Bank Disclosures

* Your loan terms are not guaranteed and are subject to our verification and review process. You may be asked to provide additional documents to enable us to verify your income and your identity. This rate includes an Autopay APR reduction of 0.5%. By enrolling in Autopay your payments will be automatically deducted from you bank account. Selecting Autopay is optional. Annual Percentage Rate is inclusive of a loan origination fee, which is deducted from the loan proceeds. Late payments or subsequent charges and fees may increase the cost of your fixed rate loan. All loans made by WebBank, member FDIC. Please refer to Upgrade’s Terms of Use and Borrower Agreement for all terms, conditions and requirements.

** Accept your loan offer and your funds will be sent to your bank via ACH within one (1) business day of clearing necessary verifications. Availability of the funds is dependent on how quickly your bank processes this transaction. From the time of approval, funds should be available within four (4) business days.

7.73% – 29.99%$1,000 - $50,000

Visit Upstart

6.26% – 14.87%1$5,000 - $100,000

Visit SoFi

6.99% – 35.97%*$1,000 - $50,000

Visit Upgrade

5.99% – 24.99%2$5,000 - $35,000

Visit Payoff

4.99% – 29.99%3$10,000 - $35,000

Visit FreedomPlus

5.99% – 18.99%4$5,000 - $50,000

Visit Citizens

15.49% – 34.49%5$2,000 - $25,000

Visit LendingPoint

6.95% – 35.89%6$1,000 - $40,000

Visit LendingClub

6.99% – 18.24%7$5,000 - $75,000

Visit Earnest

9.95% – 35.99%8$2,000 - $35,000

Visit Avant

Our team at Student Loan Hero works hard to find and recommend products and services that we believe are of high quality and will make a positive impact in your life. We sometimes earn a sales commission or advertising fee when recommending various products and services to you. Similar to when you are being sold any product or service, be sure to read the fine print understand what you are buying, and consult a licensed professional if you have any concerns. Student Loan Hero is not a lender or investment advisor. We are not involved in the loan approval or investment process, nor do we make credit or investment related decisions. The rates and terms listed on our website are estimates and are subject to change at any time. Please do your homework and let us know if you have any questions or concerns.

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