If you have bad credit, then finding a loan of any kind can be difficult. However, although it can be frustrating to secure a loan with bad credit, it is entirely possible.
One way to improve your chances of being approved for the loan you need is to provide collateral for the loan. Collateral has been around as long as people have been lending money to other people.
The collateral you offer to the lender secures the loan if you are unable to repay the debt.
Some more traditional forms of collateral are your home or vehicle. Generally, lenders accept cars as collateral only if you have a substantial amount of equity in your car. However, you may be able to get approved for a personal loan by providing collateral in other ways.
Let’s dive into the best options to secure a loan with collateral if you have bad credit.
Getting a Collateral Loan with Bad Credit
Although you can get an unsecured personal loan without collateral, you may find it easier to get approved with poor credit if you provide collateral. You may also get a lower interest rate with collateral, but it will still probably be higher than if you had good or excellent credit.
If you have decided that providing collateral is the best path for you, you have options. You can use your vehicle, savings account, or CD for some secured personal loans. The requirements for collateral will vary based on the lender and your unique situation.
Here are a few of the best lenders that offer secured personal loans.
1. OneMain Financial
Since 1912, OneMain Financial has been providing bad credit personal loans. Loan amounts range between $1,500 and $25,000 with a typical APR range between 25.10% and 36.00%
OneMain looks at your credit history. However, they are more interested in the collateral you can put up for secured loans. With OneMain, you can use a car, truck, camper, RV, or motorcycle as collateral for your secured loan.
OneMain requires you to visit a physical branch to discuss your loan options with a professional and bring in certain documents. Then, after they fund your loan, you will have various payment options to make your life easier, including through an app, through the mail, at a physical branch, and some Walmart locations.
Check out our full review of OneMain Financial here.
2. Wells Fargo
Wells Fargo is a mainstay in the American banking industry. If you currently have a savings account or CD account held at Wells Fargo, then you may be able to secure your personal loan with either of those accounts.
With Wells Fargo, you may be able to lower your APR for a secured personal loan if you put up your Wells Fargo savings account or CD as collateral. Although the collateral will not necessarily improve your chances of being approved for the secured loan, it can get you better loan terms and a higher loan amount.
The bank offers personal loans with loan amounts ranging between $3,000 and $100,000.
Use Your Car as Collateral for a Loan
If you have a vehicle on hand, then you have another way to secure a loan. Instead of pursuing a secured personal loan, you can apply for a cash-out refinancing or car equity line of credit for your vehicle.
With a cash-out refinance, you can refinance your auto loan for more than you owe on the vehicle. However, you cannot obtain a loan for more than the total equity you have in the car. For example, if you owe $5,000 on a car worth $15,000, then you may be able to cash-out refinance for up to $10,000 with certain lenders.
Typically, lenders require that your car is in good condition with a minimal number of miles to qualify for this type of secured loan. Plus, you’ll need to have some time left on your current auto loan.
Below are some online lenders that may be able to work with your bad credit if you have a vehicle as collateral.
3. Auto Credit Express
Since 1999, Auto Credit Express has worked with thousands of borrowers to secure cash-out auto refinances. The company has a quick pre-qualification form that can help you determine whether or not you should apply within seconds.
The basic qualifications are that you are bringing in at least $1,500 a month. Plus, you’ll need to be able to prove steady employment for at least one year.
Auto Credit Express may be able to connect you to a lender and a loan offer within minutes. If you want to learn more about Auto Credit Express, then read our full review here.
Car.Loan.com works to match online lenders and borrowers that are able to work together. Since 1994, the company has been working with borrowers with both good and bad credit scores.
Car.Loan.com can connect you to a lender willing to work with you in minutes after a quick pre-qualification process. Once they connect you with a lender, you need to have proof of income, insurance, identity, and residence on hand to move forward.
Check out our full review of Car.Loan.com here.
MyAutoLoan operates as a matching service. With just one application, you can receive multiple offers in just minutes.
Before you apply, make sure that you have a credit score of 500 or higher. Also, you will need an income of $1,500 a month to qualify. The interest rates on refinancing can vary depending on your car and your financial situation.
Find out more about MyAutoLoan.com in our full review here.
Use Your Home as Collateral for a Loan
Although using your vehicle as collateral is one way to obtain a secured loan, it may not be the most valuable asset you hold. For example, if you own your home, it can act as collateral for either a cash-out refinance or a home equity line of credit.
You have many options for home equity loans, but these are some of our favorites.
LendingTree offers a matching service to refinance options that will allow you to use your home equity as collateral for an immediate loan. The platform has hundreds of lender partners that it works with to find the best option available for you. Within a few minutes, you’ll have offers from a variety of partners.
PenFed offers home equity lines of credit up to $400,000 based on the value of your property. The limit to your loan will depend on the loan-to-value ratio on your home, which can be up to 90%. Depending on what you need the money for, that high limit can be a life-saver.
8. Quicken Loans
Quicken Loans works with borrowers of all credit types to provide cash-out refinances. In addition, the company has a mobile-friendly app that will allow you to walk through the process quickly. As the largest provider of mortgages in the nation, it is a company that you can be comfortable working with.
Find out more about Quicken Loans in our full review here.
9. Bank of America
Bank of America has over 5,000 branches around the U.S., which makes them an excellent option for your home equity loan. The bank offers three-year loan terms that can allow you to save money over longer-term offers. With great customer service and transparent disclosure of all fees, it is a company you can feel comfortable doing business with.
Providing collateral for a loan may be the best way to obtain a loan with reasonable terms if you have poor credit.
Deciding what to put up as collateral for a loan is a big decision. Although you hope that you can repay the loan on time, things happen. For example, you could lose your job or have another major emergency pop up.
Before you sign for any loan, make sure to understand the terms of the loan. If you cannot repay the loan, the lender may have the ability to take possession of your collateral. Therefore, only accept a secured loan if you are sure that you can repay the debt or are willing to lose the assets that you have put on the line.