How to Guarantee You Qualify for a Secured Loan

Secured loans require collateral.

Loans can provide a way to obtain expensive items that you need, such as homes, cars, home improvements and appliances. Secured and unsecured loans are the most common. With a secured loan, the borrower must offer a valuable item as collateral in case the loan is not repaid. Unsecured loans, such as credit cards, do not require collateral and present a greater risk for the lender. Collateral protects the lender because the borrower has more at stake in the transaction.

Instructions

1. Establish a strong credit rating by paying your bills on time and borrowing less than your total available credit. Although good credit is not required for all secured loans, it can lower your interest rate and therefore decrease the total cost of your loan.

2. Accumulate a sizable amount of money for a down payment. Down payments are not required for all secured loans, but may be necessary when buying big-ticket items such as cars and homes.

3. Offer something of value when applying for a secured personal loan. Items you can use as collateral include your car title, sport and recreational vehicles, boats, jewelry and musical equipment.

4. Use a cash advance or check-cashing lender. To obtain these loans, write a check to the lender for the amount of the loan plus the lender's fees. Cash advance loans are usually limited to $500. In turn, the lender will give you cash or a check for the amount of your check in the form of a loan. The check will be cashed on your next payday, no more than two weeks later. You can choose to renew the loan, but this option accumulates more fees. If you do not renew the loan and the check is cashed when your account has insufficient funds, you will incur overdraft charges.

Tips & Warnings

• Short-term secured loans, such as those offered by cash advance lenders or pawnshops, may cost a lot of money, especially if you cannot repay them according to the agreed-upon terms.

References

• Financial Web: Get a Secured Personal Loan, Fast!
• Credit Federal: Secured vs. Unsecured Loans