How do I get a Secured Loan?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 09 October 2018
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The secured loan is one of the most common types of loans in use today. Essentially, loans of this type require that the borrower pledge some type of collateral to the lender for the duration of the loan period. The collateral must be in the form of a tangible asset and must be at least as valuable as the total of the amount loaned. In order to obtain a secured loan, there are a few qualifications that a borrower must meet.

While terms and conditions may vary somewhat from one nation to another, secured loans are usually not extended unless the lender has a reasonable amount of confidence that the borrower will repay the loan plus any applicable interest. For this reason, banks and other types of lenders normally conduct a credit check and verify the employment or steady source of income listed by the applicant. When the borrower is satisfied that the lender is likely to honor the terms of the secured loan, it is then possible to determine the rate of interest and the payment schedule that will be extended to the borrower.


The lender may also take steps to verify that the asset presented as collateral is indeed the property of the applicant. For example, if a home is used as collateral, the lender will verify that the applicant is in fact the homeowner of record. The lender will also take into consideration any outstanding mortgages or other loans that currently list the home as collateral, and determine if there is sufficient equity to merit approving the secured loan.

Even with the use of some type of collateral, a bank or other lender will place a great deal of emphasis on what their research shows about the general character and financial habits of the applicant. Should the research indicate that the borrower is not a good risk even if he or she has a good job and an asset that is fully owned for use as collateral, slow payment on other debt is considered an indicator of a potential problem. In this situation, the lender will either reject the loan application or extend the loan at higher interest rates, as a response to the greater risk the lender is assuming.

In order to have the best chance of obtaining a secured loan at the best possible interest rates, it is important to make sure your credit report is in the best condition possible. Also make sure you are current on all your other debt obligations. Do not ask for a loan amount that exceeds your ability to repay according to terms. Last, make sure the collateral you have to pledge is at least worth the face value of the secured loan you seek.

Having all your financial, work, and basic information on hand when you apply for the secured loan will also expedite your chances of a quick approval. Before you file the loan application, talk with the lender in advance and ask what type of documents are required along with the application. These may include a photocopy of a driver’s license or other photo identification card, a recent paycheck stub, utility bill, and contact information for your employer.

In general, it does not take more than a few business days to approve or reject a secured loan. Some institutions can provide an answer within a matter of hours. If your application is rejected, make sure to find out why. This will give you the opportunity to correct any issues that caused the rejection before you make another loan application.



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