A secured personal loan is one you back with something you own. Put up a car, a savings balance or a certificate of deposit, and the lender takes on less risk, which is why these loans approve people that unsecured lending turns down and usually price lower than an unsecured loan to the same borrower.
The part most guides skip is that there are really two different products wearing the same name, and they solve opposite problems. Getting that fork right matters more than which lender you pick, so it is worth starting there.
Understand what collateral means before you sign. If you secure a loan with your car and you fall behind, the lender can repossess it. For most people the car is how they get to work, which is how one missed payment turns into a much larger problem. A secured loan is cheaper than an unsecured one precisely because you, not the lender, are carrying that risk.
The two kinds of secured personal loan
Everything on this page falls into one of these two buckets. Work out which one you are in before you compare a single rate.
| Asset secured | Deposit secured | |
|---|---|---|
| What you pledge | A car, truck or boat you already own | Money already sitting in your savings account or CD |
| What it is for | Getting cash you do not have | Building credit history using money you do have |
| Typical cost | Roughly 12% to 36% APR | Your deposit rate plus about 2% |
| What you risk | Losing the vehicle | Losing access to your own savings until it is repaid |
| Who it suits | Fair or poor credit, needs funds now | Thin or damaged credit file, does not need the cash |
If you have savings you can lock up, the deposit secured route is dramatically cheaper and carries almost no downside. If you need money you do not currently have, that option is closed to you and the rest of this page applies.
Where to get a secured personal loan
Upgrade
Upgrade lets you add your car to a personal loan application as collateral, which it calls an auto secured loan. The car does not have to be paid off outright, but it does need to be ten years old or newer with under 130,000 miles, or under 150,000 for trucks. Adding it can help you qualify when an unsecured application would fail, or bring down the rate you are offered.
Check your rate at Upgrade to see your rate. Checking does not affect your credit score.
OneMain Financial
OneMain is the largest secured personal loan lender in the country and the most likely answer if your credit is poor and you need a few thousand dollars. Loans run from $1,500 to $30,000 over 24 to 60 months, with APRs from 11.99% to 35.99%. Larger amounts require a first lien on a vehicle no more than ten years old, titled in your name and insured. It has physical branches, which is genuinely useful if your situation needs explaining to a person.
Two things to weigh. Origination fees are charged as a flat $25 to $500 or 1% to 10% of the loan depending on your state, which is a real cost that the APR you are quoted should already include. And funding is fast, with money available as soon as an hour after closing. As a reference point, OneMain publishes an example of a $6,000 loan at 24.99% APR over 60 months costing $176.07 a month, which is a useful sanity check on what this tier of credit actually costs.
We do not have a partnership with OneMain, so there is nothing to click here. Go direct.
Your credit union
For a deposit secured loan, a credit union will almost always beat a bank or an online lender, and the pricing is refreshingly simple. Navy Federal, as a representative example, charges the share rate plus 2.00% on savings secured loans up to 60 months, or the certificate rate plus 2.00% on a certificate secured loan, and lets you borrow up to 100% of the certificate principal without triggering an early withdrawal penalty.
That structure is why this is the cheapest secured borrowing available anywhere. You are paying roughly two points over what your own money is already earning. Nearly every credit union offers a version of this, so start with one you can join rather than assuming you need a national name.
If you do not actually need collateral
Plenty of people land on this page because they were declined once and assumed collateral was the only route left. Often it is not. Unsecured lenders vary enormously in who they approve, and putting a car on the line to save a few points is a bad trade if an unsecured loan would have gone through anyway.
- Upstart looks at education and employment history alongside your credit score, which tends to help applicants with a short credit file rather than a damaged one
- Upgrade is worth checking precisely because it does both. Its standard personal loan is unsecured at 7.74% to 35.99% APR, and if that offer comes back weak it will tell you during the same application whether adding your car improves it. That way you see both answers before you decide to pledge anything
An unsecured loan puts nothing you own at stake. Check your rate before you pledge an asset, and compare the offers against the wider field in our guide to the best personal loans.
What you can use as collateral
Lenders are pickier than most people expect. In practice the list is short.
- Vehicles. The most common. Generally needs to be ten years old or newer, under roughly 130,000 miles, titled in your name and insured
- Savings accounts. Your balance is frozen as collateral and released as you repay
- Certificates of deposit. Same idea, and you usually keep earning the certificate rate while the loan runs
- Boats and recreational vehicles. Accepted by some lenders including OneMain, though valuation rules are stricter
Things that generally do not work for a personal loan: jewelry, electronics, collectibles and household goods. If a lender is willing to take those, you are usually looking at a pawn arrangement rather than an installment loan, at a much worse price.
Secured or unsecured, which should you take
Run it in this order and the answer usually falls out.
- Apply unsecured first. If you are approved at a rate you can live with, take it and keep your collateral out of the deal entirely
- If you are declined or the rate is punitive, and you have savings you can afford to lock up, use a deposit secured loan from a credit union. It is the cheapest option on this page
- If you need cash you do not have and unsecured did not work, an asset secured loan is the remaining route. Size the payment so that a bad month does not cost you the car
- If the amount is small and short term, borrowing against an asset may be the wrong tool altogether. Our roundup of $100 instant loan apps covers the smaller end
How to apply
- Check your credit report first so you know which tier you are actually in
- Prequalify with two or three lenders. A soft pull to see your rate does not affect your score
- Have the collateral paperwork ready. For a vehicle that means the title, registration, proof of insurance and current mileage
- Compare the APR rather than the monthly payment, because a longer term hides a higher total cost
- Read what happens on a missed payment before you sign, not after
If your real goal is repairing your credit rather than borrowing, a secured loan is only one of several routes. Our guide to establishing credit from scratch covers the cheaper ones.
Frequently asked questions
There is no universal minimum, and that is the point of collateral. Secured lenders like OneMain routinely approve applicants in the fair and poor range, and a deposit secured loan from a credit union is effectively available to anyone with money on deposit, because the lender is holding your own funds. If your score is fair or better, check an unsecured rate with Upstart first before pledging anything.
Generally yes. Collateral reduces the lender's exposure, so approval odds improve and the rate is usually lower than the same borrower would get unsecured. The trade is that the risk moves onto you. Approval being easier is not the same as the loan being a good idea.
Sometimes. Lenders generally need a first lien, meaning no one else has a claim ahead of them, so an outstanding auto loan usually has to be paid off or refinanced as part of the deal. Upgrade allows a car to be added as collateral on a personal loan application and will tell you during the application whether your specific vehicle qualifies.
The lender can take the collateral. With a vehicle that means repossession, and if selling the car does not cover the balance you can still be pursued for the difference. With a savings or certificate secured loan the lender simply keeps the deposit it is already holding. Either way the default is also reported and damages your credit.
It is, when the goal is credit rather than cash. You are paying roughly two percentage points over what the deposit earns in exchange for an installment loan reported to the bureaus every month, which is one of the cheapest ways to build payment history. It makes no sense if you actually need to spend the money, because the deposit stays locked until the loan is repaid.
Where to go next
If the borrowing is to clear existing balances, read how to get out of debt before you add another payment. If the collateral you had in mind was a car, compare what you would pay on a dedicated auto loan instead, since that is usually cheaper than a personal loan secured by the same vehicle.
