Sara Routhier, Managing Editor of Features and Outreach, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming worl...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Dec 30, 2020

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Secured personal loans are different from their unsecured cousins due to the fact that they require some kind of collateral or “security” before a lender will agree to the financing. A secured personal loan not only allow for borrowers to more easily qualify for a loan, but they also usually award borrowers with lower interest rates. This is due to the fact that a lender has some kind of compensation to fall back on in the event default occurs.

[loansform]This online form allows borrowers to receive multiple rates from different lenders, affording applicants the luxury of selecting the best, most beneficial rate available.

The collateral used for secured instant personal loans can be in the form of paychecks, car titles, or home equity.

When paychecks are used as collateral the lender is assured they will receive payment if a borrower willingly stops paying their bills. In the event a borrower’s payments cease, the lender will take the proceeds from the borrower’s next paycheck. This allows the lender to loan money risk-free, and allows borrowers to obtain money quickly.

Auto titles can be put up as security as well, but should only be reserved for loans borrowers are sure they will be able to repay. In the event a borrower defaults on an auto title secured loan, their vehicle can be repossessed as compensation for the lender’s money loss. While the risk is significant, auto title loans allow borrowers to finance larger amounts of money.

A borrower’s home equity can also be used to back a secured loan. Home equity is the positive difference between the value of your property and the amount owed on that property. This collateral is great for providing insurance on refinance loans or second mortgages. However, home equity loans put a borrower’s property at risk if they default on payments.

Depending on the size of the loan requested, the lender can inform the borrower what sort of collateral they will require. As long as borrowers keep current on their payments and satisfy their loan in full by the end of the agreed upon term, the collateral will play no part in this process aside from granting them a lower interest rate.