If you need extra funds to cover expenses, you may be considering borrowing money from a lender. In some cases, securing a loan can be much easier if you offer up some sort of collateral as insurance. Let’s dive deeper into some places you can find collateral loans for poor credit so you can find an option that works for your financial situation and needs.
What is a collateral loan?
Before diving into where to find the perfect collateral loan for you, it’s important to understand what collateral loans are. In a nutshell, a collateral loan, sometimes referred to as a secured loan, is when you offer up an asset, such as jewelry, vehicles, and your house. These loans often come with easy applications and quick approvals. But keep in mind that the lender has permission to secure that asset in the case that you do not repay the loan. So, make sure you have a good repayment plan in place before applying.
Benefits of collateral loans
As is often with the case of poor credit, it can more difficult for you to borrow money. The lower your credit, the harder it may be, which is why collateral loans play a crucial part for so many. The major benefit of a collateral loan is the potential for funding when other methods do not work because of poor credit, work history, or other determining factors. Opting for a collateral loan can also mean reduced interest rates, which can make the risk involved in a collateral loan worthwhile.
Where to find collateral loans
Here are some places where you can get collateral loans to secure the funds you need:
There are several online lenders that boast their ability to say yes to your needs, even when your bank says no. If you’re in a pinch and need money fast, an online lender specializing in lending to borrowers with poor credit may be the right choice for your needs.
If you’re already a member at a bank, the chances of approval go up based on that established relationship and documented history. While collateral may not always increase the chance of approval from a bank you’re a member of, collateral can certainly be used as leverage to lower interest rates and up the borrowing amount.
If you own a home, it is most likely the most powerful tool you have for acquiring a loan with favorable conditions. One option for borrowing is to use the equity in your home to access funds up to that assessed equity amount. This can sometimes be referred to as a second mortgage and is something that households will take advantage of when they need money for financial emergencies. In the case that you’re struggling with your credit, this borrowing type allows for you to use the financial resources you do have available separate from your credit score, such as home equity.
Pawn shops are often not the first thing that comes to mind when considering funding, but they can be a great choice, especially when you have desirable collateral. In the case of pawn shops, you’ll bring in your asset, have it valued, and the pawn shop will offer a secured loan based on the asset.
You can then borrow an agreed-upon amount up to that asset amount, and in the case that you default on that loan, the pawn shop gets to keep the item. This helps to protect the pawn shop from you borrowing and running off if you’ve got something valuable on the line. Also, pawn shops usually aren’t concerned with credit scores, only the value of that object.
The bottom line
There are plenty of choices out there for securing a collateral loan despite having bad credit. Depending on your assets, you may find it easiest to work with an online lender, use the equity in your home, connect with your bank, or head to the pawn shop for quotes on loan terms. Whatever you decide, be sure to read over your contract thoroughly and only borrow from or work with reputable sources.
Notice: Information provided in this article is for information purposes only. Consult your financial advisor about your financial circumstances.