How to Get a Secured Personal Loan. Available through regular banks, specialized financial institutions and online lenders, a secured personal loan is one in which the borrower offers collateral to the lender in exchange for a loan at a lowered interest rate. To get a secured personal loan, you'll need to present proof of your monthly income and a valuable asset you can use as collateral.
Get a Secured Personal Loan
Determine how much money you need to borrow. You'll need to offer up collateral valuable enough to cover the balance of the loan. Only borrow what you need, since you'll be paying significant interest on the balance of the loan.
Make a list of assets you might use as collateral. These include any items of value that you own outright, such as a car or boat, but you might also be able to use major assets you're still paying off, such as real estate. Other assets, such as cash investments, may also qualify to be used as collateral.
Make an appointment to speak to a loan officer at your regular bank. You'll have the best chance at getting good loan terms from a financial institution where you've been a long-standing customer.
Seek alternative sources for a secured loan if you're unhappy with the terms being offered by your bank. There are a growing number of alternatives available to borrowers, both online and through non-traditional financial institutions, such as wholesale banking companies.
Remember that the annual percentage rate (APR) is but one of many important considerations you face when comparing loan terms. You'll want to know the length of the repayment term (shorter is better), and make sure you understand any additional fees that apply as well as any penalties that are attached to late or missed payments.
Negotiate the interest rate down. Since you're offering collateral, you're in a position to demand better terms from the lender. If you're dealing with your regular bank, you might even get a reduced interest rate if you agree to have the monthly payments come directly out of your account.
Sign over your collateral when you sign the loan documents. Check to make sure all terms appear on the documents as per your oral agreement with the lender.
Some lenders will allow you to use stocks, bonds and other investments as collateral. The advantage of structuring your loan this way is that you can continue to earn money on your investments while simultaneously permitting the bank or lender to hold them as collateral. You might be able to use the item you purchase using the loan money as the collateral. For example, some lenders may let you use the new car you buy as the collateral on the loan. However, this strategy puts you in double jeopardy if you default.
Late or missed payments on a secured loan will lower your credit score. You also risk losing your collateral to the lender if you default on the repayment terms.
Things You'll Need
Documentation of monthly income and secured employment
Asset(s) to use as collateral