Where to Find Secured Personal Loans
financial history: credit score, income and debts. But if your credit score
can’t snag you an unsecured loan, lenders may offer you a secured loan, also
known as a collateral loan.
A secured loan is one that enables you to pledge the title
to your vehicle, savings account or some other asset in return for a lower rate
or a larger loan amount. The downside: If you don’t make timely payments, the
lender can seize your asset and your credit score will suffer.
SECURED PERSONAL LOANS
Banks, credit unions and some online lenders offer secured
loans.
|
APR ranges |
Loan amounts |
Collateral required |
|
|
17.00% - 30.00% |
$500 - $5,000 |
Paid-off car with comprehensive and collision insurance |
|
|
2.29% - 17.49% |
$5,000 - $100,000 |
None for unsecured loans; auto title for secured loans |
|
|
9.99% - 35.99% |
$1,500 - $25,000 |
Paid-off car with comprehensive and collision insurance |
|
|
5.50% - 13.79% |
$3,000 - $100,000 |
Savings accounts or CDs |
|
|
24.00% - 36.00% |
$1,000 - $25,000 |
Car with comprehensive and collision insurance |
|
|
Varies, up to 18.00% |
Varies |
Varies |
*Terms
are for unsecured loans; may vary for secured loans.
IN THIS ARTICLE
What
can you use to secure a personal loan?
Secured
loans from credit unions
Secured
loans from online lenders
?What can you use to secure a personal loan
YOU CAN BORROW AGAINST YOUR CAR
The vast majority of secured personal loans use a car as
collateral. These loans — known as auto equity
loans — let you borrow money against the market value of your paid-off
car.
A lender that accepts your car as collateral may require
that you insure it for physical damage, naming the lender as loss payee in the
event it’s totaled. If you already dropped collision and comprehensive coverage
on your paid-off car to save money, lenders may sell you optional credit
insurance, which is often more expensive than the cheapest
full coverage.
There are two other options to borrow against your car:
Auto
refinance is an option if you still owe money on your car but have
substantial equity. Refinancing replaces your original loan with a new loan at
a higher amount. You keep the extra cash. (You’re likely to qualify for a
refinance if your credit has improved or interest rates have dropped.)
Auto title
loans, which typically have annual percentage rates as high as 300%, don’t
require a credit check and carry a higher risk of having your vehicle
repossessed. NerdWallet does not recommend auto title loans.
YOU CAN BORROW AGAINST YOUR SAVINGS
If you have money in a savings account, it’s cheaper to use
that money rather than get a personal loan that charges interest. If you must
hang on to your savings or need more money than what’s in your account, some
lenders will make secured personal loans with savings accounts or certificates
of deposits as collateral. You likely won’t have access to your account or CD
until you repay the loan.
It can make sense to secure a
loan against a CD — instead of a savings account — because withdrawing
money from a CD can incur an early withdrawal penalty. You’ll want to compare
that penalty with the interest charge on a personal loan.
Where to get a secured personal loan
BANKS
Of the nation’s five largest banks by deposits, only Wells
Fargo allows those with savings accounts or CDs to use them as
collateral to qualify for a loan or get a lower interest rate. The bank also
offers CD-secured lines of
credit that are different from loans. Borrowers cannot touch the
money in their account for the duration of the loan.
The chances of qualifying for a loan still depend on a borrower’s credit score, income and other debts, but pledging an account increases the likelihood of qualification significantly, says Jason Vasquez, a spokesman for Wells Fargo.
•APR: 5.50% to 13.79%
•Loan amount: $3,000 to $100,000
•Loan terms: One to five years; can go up to 10 years
•Minimum credit score: Not provided, but generally 680
or higher
•Time to funding: Typically same day
•Fees: No origination fee for unsecured loan; $75 for
secured loan; $39 late fee and returned payment fee
CREDIT UNIONS
Some credit
unions offer CD-secured loans, typically to build credit or get cash
quickly at a lower rate than other types of loans. Credit unions are a good
first stop for most types of loans, because they consider borrowers with poor creditand
provide affordable loans.
Federal credit unions offer a maximum rate of 18% APR to
their members, although there may be extra application fees.
SECURED LOANS FROM ONLINE LENDERS
A secured loan from a reputable online lender will carry a
maximum APR of 36%. The rate, the amount borrowed and the length of the
loan will be based on both your credit and the value of your collateral.
Some lenders let you apply for a secured loan upfront, but
others may show you the option only after you’ve tried applying for an
unsecured loan.
Most online lenders let you check your rate without
affecting your credit, so it doesn’t hurt to first apply for an unsecured
loan at multiple lenders to see if you qualify. You can use NerdWallet’s
lender marketplace to compare rates in one place.
OneMain and
Springleaf, its parent company, offer secured loans at rates below 36% to car
owners with poor credit scores. Nearly half of OneMain customers use their car
or another asset to qualify for a larger loan amount or get a lower rate.
More about OneMain:
Offers lower starting rates on secured loans than unsecured
loans
Offers auto equity loans and cash-out refinancing loans. The
average APR on an auto-secured loan is 20%, according to the company.
Requires proof of comprehensive and collision car insurance
Doesn’t accept some types of cars, such as those that
carry branded
titles or are used commercially
Mariner
Finance and its affiliate Pioneer Credit Co. offer cash-out refinance
loans and auto equity loans.
More about Mariner:
Requires borrowers to secure loans of more than $10,000
Requires proof of comprehensive and collision car insurance;
the car doesn’t need to be fully paid off
May offer a higher loan amount to a borrower, but no rate
discount, according to the company
» MORE: Compare
OneMain and Mariner for personal loans
Information below provided for unsecured loans; secured loan terms may vary.
• APRs: 17.59%-35.99%
• Loan amount: $1,500-$25,000
• Loan terms: 1 to 5 years
• Minimum credit score: None, but borrowers average 600 to
650
• Time to funding: Same day to up to three days
• Fees: Origination and late fees; both vary by state
Pre-qualify nowClick to fill out a
pre-qualification form on NerdWallet.
• APRs: 24.00%-36.00%
• Loan amount: $1,000 to $25,000
• Loan terms: 1 to 5 years
• Minimum credit score: 600
• Time to funding: Typically one day
• Fees: Origination fee, late fee, personal check fee and
returned payment fee vary by state
Get startedClick “Get started” to apply on Mariner
Finance’s site.
Finova Financial is an auto equity lender with lower rates and longer repayment periods than traditional car title lenders. The car needs to be paid off. Borrowers are required to either prepay a year’s worth of .comprehensive and collision insurance or buy credit insurance from the lender
•APR: 3.09% to 14.24% with AutoPay; 3.59% to 14.74% without
AutoPay
•Loan amount: $5,000 - $100,000
•Loan terms: 2 to 7 years
•Minimum credit score: 660
•Time to funding: As soon as the same day
•Fees: None
Pre-qualify nowClick to fill out a pre-qualification form
on NerdWallet.
Amrita Jayakumar is a staff writer at NerdWallet, a personal
finance website. Email: ajayakumar@nerdwallet.com.
Twitter: @ajbombay.
Updated June 8, 2017.
PERSONAL LOANS RATINGS METHODOLOGY
NerdWallet’s ratings for personal loans awards points to
lenders that offer consumer-friendly features, including soft credit checks, no
origination fees, payment options, short time to funding, interest rate caps of
36% and absence of prepayment penalties. Features are considered for their
positive impact on consumers’ credit history and financial health. To ensure
accuracy and consistency, our ratings are reviewed by multiple people on
the NerdWallet Personal Loans team.
Among
the very best for consumer-friendly features
Excellent;
offers most consumer-friendly features
Very
good; offers many consumer-friendly features
Good;
may not offer something important to you
Fair;
missing important consumer-friendly features
Poor;
proceed with great caution
Credit score simulator
What happens if…
TOP ONLINE LENDER REVIEWS
USEFUL TOOLS
TYPES OF LOANS
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