The best secured personal loans in March 2024 and the collateral you’ll need to get them (2024)

Our picks at a glance

Why get a secured loan?

• You’re struggling to qualify for unsecured loans. If you can’t get approved for an unsecured loan because you have bad credit or a thin credit history, a secured loan may be a good option. Since the loan is backed by collateral, lenders are more willing to accept higher-risk borrowers.
• You want a lower interest rate. Even if you’re eligible for unsecured loans, a secured loan may come with a lower interest rate, saving you hundreds or even thousands of dollars in interest.
• You have assets. If you need to borrow but don’t want to touch your emergency fund, a deposit-secured loan can offer low interest rates. Some lenders accept other forms of collateral, such as vehicles or home fixtures. Just be mindful that you’ll forfeit the asset if you default on the debt.

What is a secured personal loan?

A secured personal loan is backed by collateral (valuable items you own). These may be physical assets, such as your vehicle or home, or financial assets, like stock certificates or the funds in your savings account. Secured loans present less risk to the lender since they can seize your collateral if you default — this means interest rates are often lower than on unsecured loans and eligibility criteria are more accessible.

If you want to borrow a deposit-secured loan, your savings or CD must be housed at the institution where you plan to borrow. If your bank doesn’t offer this product (or a competing lender offers better rates), you’ll have to move your savings to the new bank to apply for a loan.

In most cases, secured loans range from a few hundred dollars to $1 million, though the amount you can borrow may be tied to the value of your collateral. Annual percentage rates (APRs) are usually between 3% and 36% — though federal credit units cap rates at 18.00% — and typical repayment terms are one to seven years, though some lenders may offer terms as long as 15 years.

Secured vs. unsecured loans

Secured loans require collateral and a review of your credit, but unsecured loans rely solely on your creditworthiness. As such, unsecured loans often come with higher interest rates, lower borrowing amounts and stricter credit requirements. If you default on an unsecured loan, your credit will be negatively impacted but you won’t lose any assets. Secured loans have more appealing rates and terms, but the lender can seize your collateral if you fall behind on loan payments — and your credit would be harmed, too.

Where can I get a secured loan?

Although unsecured personal loans are more common, you can find secured loans in several places, including:

• Banks: Some larger national banks may offer deposit-secured loans, but they’re more common at smaller, regional banks. A benefit of borrowing from a bank might be that you can keep your financial accounts under one roof.
• Credit unions: Secured loans are offered by most credit unions, but you’ll have to become a member to borrow one. Some credit unions offer membership nationwide with low barriers to entry (like a $5 deposit into a savings account), while others require you to live in a certain community or work in a certain industry. You might prioritize federal credit unions since they cap interest rates at 18%, far below some other financial institutions.
• Online lenders: Here, you’re likelier to find a more streamlined application process and fast funding. Also, if you’re looking for a property-secured loan (such as one that uses your vehicle as collateral), an online lender may be your best bet.

If you’re looking for a deposit-secured loan, begin your search at your current financial institution. But don’t forget to shop around since a lower rate elsewhere might be worth the hassle of moving your savings account to a new place.

5 common types of secured loans

Secured personal loans generally fall into two categories: those secured by deposit accounts and those secured by physical property.

1. Savings-secured personal loan

Best for: Bank or credit union customers with savings accounts

If you have a savings account with a bank or credit union, you may be able to use those funds as collateral for a loan. Your savings will continue to accrue interest as you repay the loan, but you typically can’t make withdrawals from the account until the loan is paid in full. In most cases, the amount you can borrow depends on the account balance.

Note that the savings must be held at the same institution where you plan to borrow — you can’t use a credit union savings account to get a savings-secured loan from a bank, for example. If your financial institution doesn’t offer this product, you’d need to move your savings to another bank or credit union to apply.

2. CD-secured personal loan

Best for: Bank or credit union customers with CDs

This type of personal loan uses a certificate of deposit (CD) as collateral. It can allow you to access funds early without paying the early withdrawal penalty that usually comes with CDs — but do the math to determine whether the penalty you’d face is less expensive than the interest you’d pay on a loan. (Calculate the total interest paid on your loan using a personal loan calculator, and ask your lender how much penalty you’d pay for early CD withdrawal.) Many lenders limit your borrowing to the amount of your CD, and you may only have until the CD maturity date to repay the loan.

Like with savings-secured personal loans, a CD-secured personal loan is only an option if you have a CD with a bank or credit union that offers this product.

3. Auto-secured personal loan

Best for: Vehicle owners

The most common property-secured personal loan uses your vehicle as collateral. Most lenders require that you own the car free and clear, and you’ll have to send your title to the lender until the loan is repaid. Unlike auto title loans with triple-digit APRs, auto-secured loans offer lower interest rates and longer repayment terms, making them a more affordable and less predatory option.

But be careful — if you don’t keep up with your loan payments, the lender can repossess and sell your car to recover its money.

4. 401(k) loan

Best for: Employees with 401(k) plans

A 401(k) loan allows you to borrow money from an employer-sponsored retirement account. You may lock in a low interest rate and won’t need to worry about a credit check, but you’ll miss out on market gains and compounding interest to grow your retirement savings. (Plus, if you keep up with repayment, the interest charges go into your 401(k) account, making this an interest-free way to borrow money.)

If you leave your job or are laid off, you’ll have to pay back the loan immediately — if you can’t, you’ll have to pay taxes on the withdrawn amount plus a penalty.

5. Home equity loan or HELOC

Best for: Homeowners with sufficient home equity

Although not a personal loan, home equity loans and lines of credit (HELOC) are popular borrowing options because of their low interest rates. Home equity loans provide a lump sum of cash at fixed interest rates, while HELOCs are credit lines with variable rates from which you can withdraw funds as needed, up to a set credit limit. Most lenders let you borrow between 80% and 90% of your home’s available equity, but if you default, you could lose your home to foreclosure.

Pros and cons of secured personal loans

Secured personal loans are typically easier to qualify for than unsecured forms of borrowing. Even if you have bad credit, you can typically get approved as long as you have collateral to pledge. And since secured loans are less risky for lenders, they tend to offer lower interest rates and higher borrowing limits. Like traditional personal loans, secured loans have fixed interest rates, so your monthly dues won’t change — that makes budgeting simple.

The biggest downside to secured personal loans is that you stand to lose your collateral if you default. Depending on your collateral, there may be an appraisal involved — loans secured with physical property (like a car or home fixtures) are more likely to require this step, though the lenders featured on our list (Upgrade and Best Egg, above) don’t mandate it.

7 steps to getting a secured personal loan

1. Assess your borrowing needs and budget

Since you risk forfeiting collateral if you don’t make loan payments, it’s crucial to confirm the loan’s affordability. Use a personal loan calculator (like Calculator.net’s) to understand the cost of a loan and how it would fit into your budget.

2. Check your credit

Although your eligibility mostly hinges on your collateral, lenders will still review your credit, so it’s a good idea to know where you stand.

Visit AnnualCreditReport.com to get free copies of your credit reports from the three major credit bureaus: Equifax, Experian, and TransUnion. Review your reports carefully and dispute any errors with the appropriate bureau. It’s also a good idea to check your credit scores through your credit card company, financial institution or a third-party service (usually for a fee).

3. Evaluate your collateral

To borrow a secured personal loan, you must have collateral to pledge. Take stock of your assets and determine whether you have something of value a lender is willing to accept. The least expensive option might be a savings-secured loan, but not every borrower has a substantial amount in savings — after all, the average median balance of savings accounts was just $8,000 in 2022, according to the Federal Reserve.

If you don’t have a deposit account to use as collateral, you may consider offering your vehicle or home fixtures (in the case of lender Best Egg). Property-backed loans may have higher interest rates than deposit-backed loans, but these rates are still lower than those you’ll find on unsecured loans.

4. Get pre-qualified and compare options

It may be tempting to go with the first secured loan you find, but getting pre-qualified with at least three lenders can pay off. Comparing lenders can help you find the lowest-cost loan without impacting your credit.

To zero in on the best option, compare APRs, repayment terms and collateral requirements. The loan’s APR will determine the cost of borrowing, but the repayment term can also impact your overall costs.

Example: Let’s say you need to borrow $20,000 and you’ve received the following three offers for an auto-secured loan.

If you need a loan with the lowest possible monthly payment, Loan 2 may be the best choice. However, notice that you’ll pay more overall interest on this loan due to its extended term. If you want to keep your overall borrowing costs as low as possible, Loan 1 might be best, assuming you can afford the higher monthly dues.

5. Gather supporting documents

To streamline the application process, collect the documents you’ll need, including:

• Government-issued ID, like your driver’s license or passport
• Proof of income, like pay stubs, bank statements or tax forms
• Collateral verification, like your car’s title (for an auto-secured loan) or a mortgage statement (for a fixture-secured loan)

If you’re applying for a deposit-secured loan, your bank or credit union can verify your account balance without any additional collateral verification needed.

6. Formally apply

Most lenders offer straightforward online application processes, even for secured loans. However, in some cases, you’ll need to begin or complete the application at a local branch. You may also need to get your collateral appraised, though this is less common.

When you formally apply for a personal loan, the lender will likely perform a hard credit pull, which can temporarily lower your credit score by five points, according to FICO. Some lenders offer same-day loan approvals, while others may take a few business days, especially if your collateral requires appraisal.

7. Close on the loan

Before signing your loan agreement, read the contract carefully and ask the lender any questions. Funding timelines vary by lender but may be anywhere from the same day as approval to a few business days.

Getting a secured loan with bad credit

As long as you have valuable collateral, you’ll have an easier time getting a secured loan (than an unsecured loan) because the lender’s risk is reduced. In addition to pledging an asset to back the loan, here are several tips for getting a loan with bad credit.

• Shop around. Each lender has its own eligibility criteria and interest rates. Comparing loan options can help you find the one with the lowest rates and weed out lenders that are unlikely to approve your application.
• Apply with a cosigner or co-borrower. If you have a friend or family member with strong credit, applying for a loan with them can boost your odds of approval. Their good credit scores can also help you qualify for lower interest rates. Both cosigners and co-borrowers will be on the hook for your loan if you default, but only co-borrowers share equal access to loan funds.
• Ask for less money. You’re more likely to get approved for a secured loan with bad credit if you request, say, $500 instead of $5,000. Borrowing the smallest amount you can will improve your chances of approval and keep your monthly costs to a minimum.
• Improve your credit. Unless you need the funds immediately, increase your credit scores before applying. Focus on paying your bills on time, reducing your debt and only applying for new credit when you absolutely need it.

Alternatives to secured personal loans

If secured personal loans don’t make sense for your situation or you don’t have collateral to pledge, explore the following alternatives:

Secured loans to avoid

Every secured loan carries risk — if you don’t repay the funds, you risk losing the pledged collateral. However, some loans are riskier than others, including:

• Car title loans use your vehicle’s title as collateral. While they offer quick cash and don’t require a credit check, you may be stuck with a triple-digit APR and a repayment period of 30 days, which can make the loan difficult to pay back. You can lose your vehicle if you don’t repay the loan on time — or, you may be able to extend the loan term at significant additional cost.
• Pawnshop loans give you cash in exchange for a valuable item, such as a diamond ring or guitar. They typically have extremely high interest rates and you will only receive a small fraction of your item’s value. The pawnbroker will sell your item if you don’t repay the loan.

Methodology

Our editorial team and data analysts sought to be as objective as possible when determining the best secured personal loans. We selected 16 top lenders that offered at least one secured loan product and scored them across 25 data points. We weighted the “loan cost” and “eligibility” categories heaviest, believing that borrowers looking for secured loans are most concerned with their wallets and ability to qualify.

After analyzing the data, each lender received an out-of-five-star rating, revealing the top six lenders for secured personal loans.

Loan cost (30%)

When you need to borrow money, you want to keep costs to a minimum — after all, unaffordable debt can have a long-lasting effect on your financial health. With that in mind, we examined the affordability of each loan by assessing factors like minimum and maximum APRs, available rate discounts and fees.

Loan details (25%)

Here, we examined the fundamentals of each lender’s secured personal loan, including loan terms, loan amounts, funding timelines and accepted collateral. We awarded extra points to lenders that allow several collateral options to borrowers.

Eligibility (30%)

Many bad-credit borrowers turn to secured loans for affordable financing. As such, we prioritized lenders that work with the widest range of borrowers, especially those with low credit score or income requirements. We also considered each lender’s geographic availability, favoring those that lend nationwide.

Repayment experience (15%)

After closing your loan, you want a lender that makes repayment easy and offers robust customer support. In this category, we aimed to capture the quality of each lender’s customer service by reviewing consumer reviews from independent organizations like the Better Business Bureau and the Consumer Finance Protection Bureau. We also considered factors like customer service hours and whether the lender offers a mobile app.

What didn’t make the cut

Six lenders made our list of the best secured personal loans, but a dozen more fell short. Here are three examples of lenders that didn’t pass muster: