Debt Personal Loan

5 Key Things to Check With Secured Loans

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Any loan offered in exchange for collateral is called a secured loan or secured debt. Accordingly, the risk to the lender is minimalized given the lender can take ownership of the collateral if a borrower fails to repay the loan. Secured loans are disbursed via credit card unions, banks or online loan matching platforms within a short time of applying.

The Advantage of Secured Loans

The advantage of secured loans is a borrower’s ability to access lower interest rates and flexible repayment choices despite weaker creditworthiness. Ultimately, the deciding factor for issuing secured loans for bad credit is the value of the collateral offered itself. 

Given the risk of sacrificing the collateral with secured financing, it is imperative to scrutinize lenders by checking the following five aspects.

Things to Check When Applying for Secured Loans

1. Types of Collaterals Accepted for Secured Loans

Given collateral determines the eligibility of a secured loan, it is recommended that borrowers appraise the collateral before searching for a lender. Reviewing the process of seizing the collateral by discussing it with the lender will also help to understand the risks of a failure to repay the secured loan.

Popular collateral pledged for secured loans includes:

  • Assets such as car, property or land deeds
  • Savings account funds
  • Deposit certificates

Keep in mind that 401K and IRA accounts cannot be used as collateral for procuring secured loans.

2. Inspect the Restrictions on Amounts for Secured Loans for Bad Credit

Ask lenders directly about the minimum and maximum loan amounts available. Depending on the purpose of a secured loan, borrowers must have a clear idea of the expected loan amount before applying.

3. Repayment Terms and Fees

Analyzing the repayment terms from a secured loan offering is imperative for finding the right lender. Be sure to probe the origination fees or other fees charged by the lender to avoid unforeseen penalties or expenses. The choice of fixed and flexible repayment options such as weekly and monthly alternatives may be available with secured loans depending on a borrower’s qualifications.

Falling short on monthly repayments will result in the loss of collateral pledged for the secured loan. Additionally, if repossession of the collateral does not generate enough funds to cover the debt, the borrower might be liable to pay the difference directly to the lender.

4. Compare Secured and Unsecured Loan Options

Although secured loans for bad credit likely can access great rates thanks to the inclusion of collateral, sometimes it makes more sense to pursue an unsecured loan depending on the interest rate differential.  By selecting an unsecured loan, failure to repay will not result in the seizure of collateral.  However, borrowers with weaker credit who can afford the secured loan repayments will be rewarded with rising scores in response to steady and consistent repayment.

5. Finalize the Interest Rates Before Taking the Loan   

Check the interest rates including the APR prior to signing for the loan to avoid any miscalculations and understand the full liability. While the interest rates for secured loans are generally more affordable thanks to the inclusion of collateral, its best not to be taken by surprise about rates should a late payment or delays occur during repayment.


Getting a secured loan that fits well with monthly earnings, debts, bills and expenditure is crucial for repaying it without losing the pledged collateral. To determine if applying for secured loans online is a good fit, review the five factors above to ensure a secured loan for bad credit is the best small business financing option.

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