If you have very bad credit, you may be unable to obtain a personal loan unless you are willing to put up collateral. Then, if you default on the loan, you forfeit whatever you used for collateral. Before you decide that this isn't an option, you should make sure that you are aware of all the forms of collateral you can choose from.
Using Your Savings Account
You may be allowed to borrow up to 100% of your savings account balance, especially if the account is with the same institution making the personal loan. This allows the bank to withdraw from your account after a default.
Vehicles As Collateral
Various vehicles can be used as collateral for a loan. Title loans ask you to use the title of a car as collateral for a loan. Other vehicles can include an RV, boat, camper or a piece of farm equipment. There is usually a maximum number of miles allowed before the vehicle is accepted as collateral. The more valuable the vehicle, the greater the loan and the lower the APR.
Your Home Equity
The equity in your home could be used for larger expenses. Your equity is based on how much your home is worth, with the amount you still owe subtracted. For instance, if your home is worth $200,000 and you owe $50,000, your equity would be $150,000. Therefore, you will want to have your home appraised before pursuing this type of loan. Usually, it is a bad idea to use a home for collateral for covering short-term expenses.
Getting A Secured Loan With Good Credit
Even if you have good credit, you may still choose to use collateral. If you are certain that you will pay back your loan, collateral leads to a lower APR. With a good credit score, you may be able to receive a secured loan from a bank. However, if your credit is very poor, you are more likely to receive a loan from a credit union.
Always Pay Off Your Secured Loans First
If you are having financial difficulties, you might want to focus your energies on paying off your secured loan. Defaulting on unsecured loans could lead to you being turned over to collections, but defaulting on a secured loan could cause you to lose your house or car. Pay close attention to the terms and conditions so that you can make an informed decision on what you are willing to put up as collateral. Contact a company like Union State Bank for more information.