Where Can You Get Secured Loans?
There are three major types of lenders you can go to for secured loans:
- Bank lenders. If you already have a relationship with a bank, this might be a good place to start, but be advised that not all banks offer secured loans and your current bank may not necessarily offer the most competitive terms on secured loans.
- Credit unions. Some credit unions offer many of the same services as banks, including loans. This would require that you be a member of the credit union, but membership requirements have become much less restrictive over the years.
- Non-bank lenders. There are many firms that specialize in lending without offering traditional bank services, like deposit accounts. Many of these non-bank lenders have a strong on-line presence, which makes finding and comparing rates all the easier.
Use these choices to your advantage by shopping around for the best loan terms available. Because interest rates on secured loans can be fairly steep, shopping around can result in significant savings.
Risks to Consider About Secured Loans
Putting up property can help you get a loan, but this is not a decision to be taken lightly. Here are three things to consider first:
- Having property does not mean you can afford the loan. The issue here is having enough cash flow to make the loan payments. You may have some personal property worth $10,000 which can help you get a $10,000 loan, but the real question is whether your income and existing expenses will allow you to make the payments on the loan. If not, you risk forfeiting that property or having to liquidate it under unfavorable circumstances.
- Job security is a key variable. Looking at your current budget to see if you can afford the loan payments is important, but it is only a start. Loans are typically multi-year commitments, so you need to be confident that your income will continue to be enough to support the loan payments. This involves assessing your job standing at your current employer, the stability of that employer, and the marketability of your job skills should you have to make a change.
- The risk of losing your property is serious. If there is a reason you don't want to simply sell your property and use the cash now, chances are you won't want to be forced to sell that property later on to make good on the loan. That may entail losing property that is hard to replace, or having to liquidate an investment portfolio at an inopportune time. The lender may consider seizing the collateral as an acceptable fallback position should you default on the loan, but you should not view it as an acceptable outcome.
Whether you choose a secured or unsecured loan, remember that different lenders are likely to offer different interest rate and fee terms for loans that otherwise seem identical. Some shopping around can make your loan decision as cost-effective as possible.