Secured Loans for Bad Credit

If you have bad credit but need money to cover expenses, consider looking into secured loans. With a secured loan, you’ll need to own something of value to offer the lender as collateral. 

Here’s a closer look at secured loans for bad credit and how they work. 

How do secured loans work? 

Secured loans are backed by collateral or assets you own, like a house or car. When you apply for a secured loan, the lender will ask you what type of collateral you’d like to secure. The loan amount the lender offers is based on a percentage of the collateral item’s value. 

If you default on your loan, the lender can seize your collateral and sell it to recover the cost of the loan. 

While a collateral loan requires you to put an asset on the line, it can help you get approved for a loan with favorable rates and terms, even if you have bad credit. 

Some common types of secured loans are: 

• Title loan: This is a loan secured by a car, van, truck, recreational vehicle, or boat that you own free and clear. 
• Pawn shop loan: A pawn shop loan is secured by miscellaneous collateral, such as jewelry, musical instruments, power tools, or electronics. 
• Mortgage: A mortgage is a secured home loan that uses the home and property as collateral. 
• Secured line of credit: This open-ended loan secured by a house or car allows the borrower to withdraw and repay funds as needed. 

Secured loans and your credit 

There are a few ways secured loans can affect your credit. When you first apply for one, a lender will likely run a credit inquiry, which may or may not temporarily lower your score. But you can boost your credit if you’re approved by making consistent, on-time payments. 

What credit score do you need for a secured loan? 

Because they’re backed by collateral, secured loans often have more lenient credit score requirements than unsecured loans. Borrowers with credit scores as low as 580 can be approved for secured loans, although having a higher score of 600 or above may mean better interest rates and terms. However, even borrowers with poor credit may still be able to get a secured loan since collateral reduces the lender's risk. 

Can you get a secured loan with bad credit? 

Since collateral loans are less risky for lenders, they usually have less strict requirements. So, if you have bad credit, you may still qualify for a secured loan. During the approval decision process, lenders will consider factors besides your credit score, like your collateral, debt-to-income ratio, and employment situation. 

How to apply for a secured loan if you have bad credit 

1. Compare lenders 

Not all secured loans for bad credit are created equal. Shop around and explore your options. Compare interest rates, terms, fees, and perks to choose the right loan for your unique situation. 

2. Choose a secured loan option 

Once you’ve done your research, decide on a secured loan. Be sure you can afford to repay the loan you choose so you can avoid losing your collateral. 

3. Gather the necessary documents 

Collect the documents you’ll need for your application, such as government ID, pay information, proof of ownership of your collateral, or other documents regarding your collateral item. 

4. Fill out an application 

Next, fill out the application for a secured loan in-store or online from the comfort of your home. Before submitting your application, review it for accuracy to avoid delays with approval and funding. 

5. Wait for approval 

After you submit your application, you’ll need to wait for approval. Fortunately, many secured loan lenders offer quick approval decisions and may approve you instantly. You won’t have to wait days or weeks. 

6. Receive your funds 

You may receive your loan money via direct deposit, prepaid card, or check. Most lenders will let you choose your preferred funding option, and you may get the money the same day you apply or within 24 hours. 

Is a secured loan for bad credit a good idea?

 If you need to cover an expense but don’t have the money on hand, a secured loan for bad credit might make sense. This is particularly true if you’ve had trouble qualifying for unsecured loans because of your credit score. Just make sure you’re comfortable putting an asset on the line and feel confident you’ll be able to make your payments. 

What you’ll need to qualify 

While every lender is different, many require the following when you apply for a personal loan with collateral: 

• Collateral: This may be a house, car, savings account, piece of jewelry, or another valuable item. 
• Government ID: Most lenders ask for one or two forms of ID, like a driver’s license, passport, birth certificate, or Social Security card. 
• Proof of income: Since lenders often have minimum income requirements, you may need to provide pay stubs, bank statements, and tax returns. 
• Proof of address: A proof of address is a document with your full name and address, such as a utility bill, leaves statement, or voter registration card. Some lenders might use it to verify where you live. 

Advance America loans for bad credit 

At Advance America, we don’t require collateral for our loans. We offer a variety of unsecured loans and work with borrowers with less-than-perfect credit. If approved, you could receive money the same day. 

Visit your nearest location or apply online today.