For a secured loan the borrower pledges his asset to obtain the loan. Usually the value of the asset and the amount of the loan both are large. For example, the borrower may pledge his house and obtain monies. These monies could be utilized for upgrades and repairs on the house. Because of the collateral on the asset, these loans can be obtained very easily.

A secured loan is based on collateral. Collateral is tangible property that the lender places a lien on when providing the loan to a borrower. An example would be a home or car loan. The home does belong to the owner, but the lending institution has a right to take and sell the home if the owner does not make his payments according to the terms of his loan.

You can apply for a secured loan at your local bank or credit union. Bring proof of income and evidence of your collateral. Also, search for lenders who offer the kind of loan you want. Most are offered online as well as in person, except for pawn shops. Local banks and credit unions may be less interested in offering even a secured loan if you have bad credit, though it’s still worth asking, especially if the bad credit is due to a unique incident, such as high medical bills or a divorce, and you can show that your credit is recovering. Avoid paying for lists of lenders, since you can usually find them yourself for free through search engines.

Even if you have bad credit, you can get a secured loan if you have something of value. A secured loan means you put up an item you own as collateral, so if you default on the loan, the lender can use the value of the item to cover the debt. Car loans and mortgages are common examples, since a bank can foreclose on a house or repossess a car if you fail to pay. However, anything of significant value can be used as collateral for a loan. If you have bad credit, a secured loan may help a lender have confidence to offer you a loan, though it also means the item you provide as collateral can be lost if you fail to pay the loan back as agreed.

Compare costs. Unfortunately, if you have bad credit, secured loans will probably be offered for a smaller percentage of your collateral’s value, and your interest rate will be higher. Getting any type of financing after a bankruptcy is challenging because a bankruptcy on your credit file can significantly drop your credit score. Pawn shops and car title loans will probably be the worst, while a home equity loan may be the cheapest, if you can get it.

Check not only the interest rate, but other fees as well, and also ask what restrictions will be put on the property that you give as security. Car loans allow you to continue to drive your car normally, but may require a certain amount of insurance, while loans based on jewelry or similar valuables usually require you to give up the item to the lender’s possession for the length of the loan. If you’re working to rebuild your credit, it’s worth asking if the lender reports to the three main credit bureaus, so timely payments will go on your record and help improve your score.

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