What Assets Can You Use to Get a Secured Personal Loan?

If you need to borrow money, a personal loan is one option. A personal loan could be provided by a bank, credit union, or online lender. You'd apply to borrow a set amount of money and, if approved, a lender would distribute the funds for you to use for any purpose. You'd be charged interest, at a rate your lender sets, and would pay back the loan -- usually over a few years.

Personal loans can fall into two categories. Secured loans are those where you pledge collateral, while unsecured loans are those guaranteed only by your word. It's important to understand the differences and make sure you know what kinds of assets you can use to get a secured personal loan.

Here's what you need to know. 

You can use these assets to get a secured personal loan

When you get a secured personal loan, you must pledge collateral to gain approval. This means you must give your lender an ownership claim over some of your assets. If you pay as promised, you keep the collateral. If you don't, your lender can easily seize the assets to satisfy the debt.  

Secured loans are less risky for a lender because if you don't pay, it has assets it can take. This is different from an unsecured loan, where you simply promise to pay and a lender doesn't have a right to take your assets if you fail to fulfill that obligation. You can get approved for a secured loan much more easily because they present less risk to the lender, but you need assets to guarantee the loan.

The specifics of what types of property can serve as collateral will vary from lender to lender, but in general, the following types of assets could potentially be used to guarantee a secured personal loan:

• Your house
• A vehicle
• Money in your savings account
• Money in your investment accounts
• Valuable possessions, such as art or jewelry
• Future paychecks

If you are considering applying for a secured personal loan, ask your lender exactly what the requirements are for the assets that you pledge to guarantee the loan. That way, you can make sure you have sufficient collateral to get approved. 

Should you take out a secured personal loan?

If you need to borrow and you have the assets to guarantee the loan, a secured personal loan can be worth considering. However, you should find out first if you can get an unsecured loan at a reasonable rate so you don't put your assets at risk.  

Your credit score and income will impact eligibility for an unsecured loan much more than for a secured one, so if you don't qualify on your own, you can try to take steps such as paying down debt to improve your credit score. You could also see if a creditworthy loved one with a good credit score and plenty of income might be willing to cosign an unsecured loan for you. 

If you cannot get an unsecured personal loan at a competitive rate, there's nothing wrong with moving forward with a secured loan as long as you are confident you can make every payment. Remember, you are putting your collateral on the line so you don't want to take a chance of borrowing if you might default.

If you have looked carefully at how the loan payments will fit into your monthly budget, you're confident you can make every payment, and you truly need to borrow but can't get affordable financing elsewhere, a secured personal loan may make sense for you. Just be sure to compare rates and terms carefully among lenders, and to ask upfront exactly what collateral is required so you can ensure you qualify.