The Best Secured Personal Loans for 2022


frequently asked Questions

Are Secured Personal Loans Easier to Qualify?

Not only are secured personal loans easier to get compared to unsecured loans, but you may even get a better interest rate. This is because if you default on your loan, the lender can keep your collateral, whether it’s secured by your vehicle, savings account, certificate of deposit, or stocks.

Do Personal Loans Hurt Your Credit?

When you take out a personal loan for the first time, you may initially experience a drop in your credit score. However, if you continue to make payments on time, your credit score will usually increase. If you don’t have an established credit history, a secured personal loan can help show future lenders that you’re reliable.

What is the interest rate on a personal loan?

Personal loan interest rates vary widely based on many factors such as credit history, payment history, debt, loan terms and amount borrowed. These rates are typically between 3% and 36%. A secured loan can offer a lower interest rate because the lender has the right to confiscate your collateral if you default.

What are the alternatives to secured personal loans?

Instead of getting a secured personal loan, consider an unsecured personal loan. Your interest rates will be higher as there is no collateral to protect the lender if you default. However, this also means you won’t lose any collateral like your home, stocks, CDs, or savings account.

Another alternative to a secured personal loan is a credit card. Interest rates will be higher, but some promotions offer introductory interest rates as low as 0%. Or rewards credit cards can help you earn cashback or travel rewards.

Does a Secured Loan Build Credit?

A secured loan helps build credit, and many people get them just for that purpose. Credit unions in particular like to promote secured loans to build credit to provide financial education. A member can deposit a certain amount of money into a savings account and use this as collateral for a personal loan. Every payment made is reported to the credit bureaus.

It is important to make all your secured loan payments on time otherwise you may lose your collateral and affect your credit score.

Can you repay a secured loan early?

Yes, you can pay off a secured loan early. The vast majority of lenders do not charge a prepayment penalty for this either. However, if you’re using a secured loan to build your personal or business credit, you may find it worth continuing to make payments even though you can repay it early.

Prepaying a home improvement loan might be considered if your debt-to-income (DTI) ratio is too high to qualify for any other specific borrowing need. For example, on your personal loan, your DTI ratio may be too high to get a car loan and you must prepay that credit enhancement loan to lower the ratio in order to qualify.


How we selected the best secured personal loans

We looked at 27 of the best secured personal loans available and narrowed them down to the top six options based on several characteristics and considerations. We have considered interest rates, credit requirements, valuations, loan amounts and repayment terms. Another important factor in determining the best loan options is fees – some lenders charge set-up, application, and annual fees. Some lenders even charge a prepayment penalty if you repay your loan early.

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