1/4/2023
Among the many forms of financing you can find in the United States are secured personal loans.
Designed for those who do not have the best credit score, they make it easier for you to get extra money for your projects. That's why we want you to know what to expect from this financial product.
You may be interested: Personal loans with bad credit score
How a secured personal loan works
When you borrow money, those who give it to you expect you to pay it back in full and under the terms of the signed contract. Unlike other types of financing, a secured personal loan includes a guarantee on the amount loaned. This way, banks and lenders are sure to get their money back in case you default.
- Amount: between $ 2,000 and $ 100,000
- Term: between 1 year and 10 years
- Interest: 7.24%
- APR: 7.24%
- Amount: between $ 2,000 and $ 500,000
- Term: between 1 year and 5 years
- Interest: 8.50%
- APR: 8.50%
- Amount: Ask
- Term: 0 months
- Interest: Ask
- APR: Ask
- Amount: From $ 5,000
- Term: between 1 year and 5 years
- Interest: 11.99%
- APR: 11.99%
- Amount: between $ 2,000 and $ 300,000
- Term: between 3 years and 15 years
- Interest: 9.24%
- APR: 9.24%
- Amount: between $ 5,000 and $ 500,000
- Term: between -1 months and 20 years
- Interest: 8.25%
- APR: 8.25%
- Amount: between $ 250 and $ 100,000
- Term: 0 months
- Interest: 10.50%
- APR: 10.50%
- Amount: between $ 1,000 and $ 100,000
- Term: between 1 year and 5 years
- Interest: 4.16%
- APR: 4.16%
Secured personal loans work in the same way as other loans. That is, you make the request for the amount you need and the most convenient term to pay it back.
Depending on the interest rate and terms, you can choose to continue with the process or not. The only thing is that you will have to decide what collateral you can use.
What is used as collateral in a secured loan?
Contrary to what you may believe, a secured loan does not require you to pledge your house or apartment as collateral. It must only be an asset of value that the lender considers acceptable.
Generally, you can put up as collateral a vehicle, jewelry, certificates of deposit, savings, property or art, among other possessions.
Once you have the requested funds, you can use them as you see fit, as there are no restrictions in this regard. Many people with a bad or fair credit score use this resource to consolidate debts, move, repair a car, make renovations to add equity and much more.
Another detail regarding secured personal loans has to do with the interest reference lenders use.
Instead of using the APR, which tells you the annual percentage over the monthly payments, they use the APRC (Annual Percentage Rate of Charge), which includes both the interest rate and other possible charges related to the financing.
How to get a secured personal loan in the U.S.
You could say it depends on how bad your credit score is. Usually, it is easier than getting an unsecured personal loan.
In any case, the bank or lender reviews your credit file to see how you are doing. If your financial situation has improved and you are a more responsible person, you will have no problems.
The verification of your history, as well as your economic circumstances, also influences the amount of money they might give you.
If for some reason the entity or company that is going to finance you considers your application too risky, it is possible that they will deny you the loan or that the term and amount will not be what you expect.
Banks that offer secured personal loans
Amerant Bank
Among Amerant Bank's personal loans, you can find a secured loan that allows you to obtain a minimum of $2,500 and a maximum of the amount you deposit with the bank in a Certificate of Deposit that will serve as collateral for the loan.
You can enjoy a repayment period of between 6 months and 5 years. Available in the states of Florida and Texas.
Fifth Third Bank
With this financial institution you can obtain several forms of secured financing, one in the form of a personal loan and another in the form of a line of credit:
- Secured Personal Loan. Get up to $500,000, with no origination or prepayment fees. The collateral used can be the balance of a savings account, a certificate of deposit or investment products that you have contracted with the bank. The repayment term ranges from one to five years.
- Secured Line of Credit. Fifth Third Bank customers who have a checking or savings account with Fifth Third Bank may have a secured line of credit with a maximum limit of $100,000 that may not exceed 10% of the liquid balances on deposit.
Available in the states of Florida, Georgia, Illinois, Indiana, Kentucky, Michigan, North Carolina, Ohio, South Carolina, Tennessee and West Virginia.
BMO Harris Bank
If you have a certificate of deposit or savings account at BMO Harris Bank, you have access to their Savings Secured Loan that can get you the same amount you have on deposit at the bank.
In addition, there are no origination or repayment fees and you can get a discount on the interest charged if you automate monthly payments to your checking account.
Available in the states of Arizona, Florida, Illinois, Indiana, Kansas, Minnesota, Missouri, Texas, Washington and Wisconsin.
KeyBank
KeyBank offers a secured personal loan that you can secure through a certificate of deposit, savings account or investment account.
The loan repayment term is between 12 and 60 months and if you have an excellent credit rating and apply for more than $25,000 you can get a reduced interest rate.
Available in the following U.S. states: Alaska, Colorado, Connecticut, Florida, Idaho, Indiana, Massachusetts, Maine, Michigan, New York, Ohio, Oregon, Pennsylvania, Utah, Vermont and Washington.
Does taking out a secured personal loan affect your score?
Like other forms of financing, such as payday loans, quick loans or mini-loans, this resource can have a positive or negative impact.
The important thing is that you pay your installments on time, do not fall behind and comply with the terms of the contract. As long as you show good repayment behavior, it will look good on your record.
What we do not recommend is that you use secured personal loans to increase your credit score, as this is riskier. Instead, you can opt for an online express credit or a small loan from a bank for this purpose.
You can also apply for a secured credit card to rebuild your credit image.
Advantages of secured personal loans
| Faster approval | As we have mentioned, unsecured personal loans have fewer requirements than unsecured loans. This is because the bank or lender assumes less risk for the collateral you must provide. |
Build your credit
| It's not the ideal way to start or recover your credit score, but it works too. All you have to do is make the monthly payments and demonstrate responsibility. |
| Higher amounts | When you put up property as collateral, you may qualify for a much larger amount than if you apply for unsecured credit. However, you run a greater risk. |
Disadvantages of secured personal loans
| Risk of loss of collateral | Logically, if you start to fall behind in your payments and eventually stop paying, they take away the guarantee you left. |
| Higher interest rates | It is possible to obtain a secured personal loan with low interest rates. However, there are lenders who use car title loans with very high interest rates (100-300%) to take advantage of people with poor credit scores and few options. |
| Unmanageable debt | Just because you qualify for a larger amount doesn't mean you should take it without thinking. Remember that you risk the collateral and taking on more debt than you can handle can affect your future plans. |
Español: Préstamos personales asegurados en Estados Unidos