Secured loan or secured collateral loan are backed by a borrowers asset. If for some reason you default on your loan, the lender can claim the collateral item. This can make collateral loans a safer option for the lender and can bring some added benefits to you as the borrower.
Benefits of a secured loan
As collateral loans are a way for lenders to assure they’ll get their money back, lenders may be more relaxed with credit requirements and it may be easier to get a loan if you have bad credit.
As the risk is lower for a lender, loan or interest rates will generally be lower than unsecured loans and this will help you save over the long term.
What assets can I use for a secured collateral loan?
1. House or home equity collateral loans
If you own your own home or have other real estate property, you can use that as collateral for a secured loan. Mortgages are examples of loans secured by the property as collateral. If you default on your mortgage, the bank can foreclose your property.
As your home is one of your most important assets, it’s important to protect it and borrow wisely if you are going to take a home equity loan. If you can’t pay back the loan, you may risk losing your home.
Before getting a home equity loan make sure to do your due diligence and check for the best rates and loan terms. Stay away from lenders that use high-pressure tactics, hide important details or refuse to let you review copies of the forms you’ve just signed.
2. Auto collateral loans
Auto collateral loans are a common form of secured collateral loans. A car collateral loan is secured by the car’s value. Other vehicles and boats can also be used as collateral for a personal or auto equity loan.
3. Security-based or Stock-based loans
Did you know that you can use your investments as collateral for a secured personal loan? Investment brokerages and banks offer these types of loans to clients that have investments with them.
Stock holdings or other investments are used as collateral and a lender can extend credit to the amount of your investment portfolio value. However, as your investment value can change with the market, your lender may demand extra cash if your investments fall below the amount that you owe.
Keep in mind that retirement accounts generally can’t be used as a collateral secured loan.
4. Future paycheck loans
To help you with certain situations such as moving expenses or filling in gaps with irregular paychecks, you can get a cash advance loan with the agreement that you will pay it back when you receive your paycheck. Keep in mind that this is different from a payday loan with poor lending practices that make them incredibly costly.
Legitimate cash-advance options exist with many lenders, banks, credit unions, and even accounting apps. Remember that repayment is usually required very quickly once you receive your next paycheck.
4. Savings-secured loans
Some banks and credit unions offer savings-secured or certificate-secured loans. This will allow you to keep your liquid cash in a deposit account earning interest while getting a loan to fund something that you may need.
It’s important to note that your deposit will usually gain less interest than the rate you will pay on your loan. While this may be a great way to build credit, it may be less costly if you simply use cash from your savings to pay for expenses rather than take out a loan.
Looking for more information on car secured collateral loan BC? Learn more about how Instant Auto Loans can help you finance a car with a car collateral loan. With some of the best rates in the short term lending industry, our car collateral loans can help you with your financial needs. Give us a call today or apply online.