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A secured personal loan is a type of loan that requires collateral*, typically a car or home, to secure funding. Offering collateral generally lowers a lender’s risk, so borrowers may qualify for lower rates and higher loan amounts compared to unsecured personal loans.

To learn the differences between unsecured and secured loans, click here.

A secured personal loan could be right for you, but it all depends on what your needs are.

On the plus side, secured loans typically come with lower interest rates and higher loan amounts than unsecured personal loans due to the lowering a lender’s risk with collateral. Similarly, qualifying tends to be easier with less requirements, so they can be a great option for people with low credit scores or a limited credit history.

The reason borrowers can qualify for lower rates and higher amounts is also the major con of secured loans. If they can’t repay the loan, the lender may sell the collateral to recoup their losses. Before considering a secured personal loan, it’s crucial to have a defined repayment plan in place.

Need help better understanding collateral? Read our article here.

If you don’t want to use a secured personal loan with collateral to get money, there are plenty of options available.

Unsecured personal loans are based only on your creditworthiness and don’t require collateral. With that said, they usually have higher rates than secured loan options.

Credit cards provide a revolving line of credit that can be used for just about anything. While they have higher rates than most financial products, you can earn rewards without paying interest by paying your balance in full each month.

Home equity lines of credit, or HELOCs, allow homeowners to borrow against the equity in their homes and use the money for large expenses. With a HELOC, the collateral required for funding the loan is the borrower’s home.