What Can Be Used As Collateral for a Personal Loan?

Collateral loans are loans that require the borrower to pledge an asset as collateral to be approved by the lender.

Collateral makes lenders feel secure when approving loans. It allows them to reclaim assets if the borrower defaults, reducing their financial risk and creating a safer lending environment for everyone.

The lender can seize the asset in the event of a default. Collateral loans are also known as secured loans.

So, do you need collateral for a personal loan? Not necessarily. Unsecured loans do not require collateral, while secured loans do. Because of this, secured loans are generally easier to qualify for if you have poor credit.

What can be used as collateral for a personal loan? Collateral for a loan can include a home, a car, or another type of property that borrowers offer up as security for the loan.

If a borrower fails to make their loan payments, the lender has the right to take possession of the collateral to recover their losses.

This means that, for example, if you use your car as collateral, the bank can take ownership of it if you do not repay the loan.

Below are examples of items that could be used as loan collateral for a secured loan:

• Real estate property
• Car
• Recreational vehicle
• Boat
• Jewelry
• Collectibles

Secured credit cards and loans, backed by collateral, typically offer lower fees, better annual percentage rates (APRs), and longer repayment periods.

If you have a personal loan with collateral, you can still use the collateral while you pay off the loan. However, if you fail to pay the borrower may take possession of the collateral.

Unsecured loans don’t require collateral, offering flexibility, though these often come with higher fees and interest rates. Lenders will review your credit score and income to determine loan eligibility.

If you’re fine with collateral, you can search for the best personal loans for your financial needs through LoanFinder™️ today!