A secured loan is a loan where you offer some form of collateral to assure a lender that you will repay your loan. If you go into default on your loan, the lender has a legal right to seize the assets you used as collateral and sell it to recover their money.

They have lower interest rates than unsecured loans and are much easier to obtain. This is particularly true if you have bad credit, as your loans will be classified as a high risk loan by the lender. Unsecured loans are given based solely on your ability to repay the loan, which is based on your credit score. If you have a low credit score, these types of loans might not be available to you. However, if you have some form of property that you can use as collateral, even with bad credit you may be able to get a reasonable secured loan.

If you need money, a secured loan can actually offer you a few benefits other than access to cash. Having a loan helps build your credit history and making payments on time helps Fix a bad credit report. Your credit score takes into account your outstanding debt, payment history, and current account standing. You can improve the last two of these with a loan that you make regular payments on. If you play your cards right, you can build up your credit enough that you can refinance your loan a few years down the line for a much, much lower interest rate.

Home Equity Loans

The most common type of secured loan is a home equity loan.  Home equity loans are taken out against the equity that you have available in your home, so you can get one even if you still have some mortgage debt outstanding.  Beware of closing costs for the mortgage, depending on the company that you’re with there may be more charge than you initially assume.  These loans also still involve substantial credit checks, so if you have extremely bad credit, it may not be available to you.

Another type of secured loan for people with bad credit is a car title loan, or logbook loan. A car title loan is secured against, you guessed it, your car. It’s generally approved without any credit check and only requires that you have no outstanding debt on your vehicle. The amount that you can borrow depends on the make, model, and year of the car that you own.

Secured loans can also be taken out against other valuable items, such as collectibles or jewelry.  However, in these cases, the bank will generally take custody of the assets while you repay the loan.  So don’t take out loans against expensive jewelry you were still planning on wearing.  Banks generally don’t deal in these types of loans, but you should be able to find loan companies in the yellow pages willing to deal with you.

Always exercise some caution when dealing with companies that deal only with bad credit customers.  They may have fine print that  gets you into trouble later in the loan, especially if you miss a payment, they may put very punative charges on your account.  Do you research, make sure that you deal with a reputable company, and don’t take out more money than you absolutely need due to the high interest rates you will most likely be paying.