The best secured personal loans for 2021

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Frequently Asked Questions

Are secured personal loans easier to get?

Not only are secured personal loans easier to obtain than unsecured loans, but you can even get a better rate. Indeed, if you do not repay your loan, the lender can keep your collateral, whether it is backed by your vehicle, your savings account, your certificate of deposit or your shares.

Are personal loans bad for your credit?

When you take out a personal loan for the first time, you may experience a decline in your credit at first. However, if you continue to make payments on time, there is usually an increase in your credit score. If you don’t have established credit, getting a secured personal loan can help show future lenders that you are reliable.

What is the interest rate for a personal loan?

Interest rates on personal loans vary wildly depending on many factors such as credit rating, payment history, debt, loan terms and the amount borrowed. These rates are generally between 3% and 36%. A secured loan may offer a lower interest rate because the lender has the right to collect your collateral in the event of default.

What alternatives are available to secured personal loans?

Instead of getting a secured personal loan, consider an unsecured personal loan. Your interest rates will be higher because there is no collateral to protect the lender in the event of a default. However, it also means that you won’t lose collateral, like your house, stocks, CDs, or savings account.

Another alternative to a secured personal loan is the credit card. Interest rates will be higher, but some promotions offer introductory interest rates as low as 0%. Or, rewards credit cards can help you earn cash back or travel rewards.

Does a secured loan create credit?

A secured loan helps create credit, and many people get it just for that purpose. Credit unions in particular like to advertise secured loans to build credit to teach financial literacy. A member can deposit a sum of money into a savings account and use it as collateral for a personal loan. Every payment made is reported to the credit bureaus.

It is important to make all of your secured loan payments on time, otherwise you could lose your collateral and hurt your credit score.

Can you repay a secured loan early?

Yes, you can pay off a secured loan early. The vast majority of lenders also don’t charge prepayment penalties. However, if you are using a secured loan to help build your personal or business credit, it may be worthwhile to keep making payments even if you can pay it off sooner.

You might consider paying off a credit loan sooner if your debt-to-income ratio (DTI) is too high to qualify for another specific loan need. For example, with your personal loan, your DTI ratio may be too high to get a car loan, and you will have to pay off that credit loan sooner to lower the ratio in order to qualify.


How we choose the best secured personal loans

We’ve reviewed 27 of the best secured personal loans available and narrowed them down to the six best options based on several features and considerations. We took into account rates, credit score requirements, reviews, loan amounts and repayment terms. Another important factor in determining the best loan options is fees – some lenders charge set-up, application, and annual fees. Some lenders even charge a prepayment penalty if you prepay your loan.


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