What Should I Consider When Getting a Secured Loan?

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  • Written By: N. Madison
  • Edited By: Bronwyn Harris
  • Last Modified Date: 11 February 2020
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There is much to consider when you’re in the market for a secured loan. From interest rates and loan terms to collateral and credit, there is more to obtaining a secured loan than simply signing a loan agreement. To ensure that you get the best deal, without putting your financial future at risk, it is wise to carefully consider every detail of a secured loan offer.

When you opt for a secured loan, you will have to provide collateral as a guarantee against your payment of the loan. If you fail to repay the loan, the lender has the option of taking possession of your collateral. Often, when a borrower defaults on a secured loan, the lender sells the loan collateral to recoup some or all of the money that is owed. Additionally, the borrower's credit score may decrease dramatically, making it harder to obtain credit in the future.

Consider what you have to offer as collateral for a secured loan. Often, real property is used as collateral. For example, a loan may be secured with a house, car, piece of artwork, computer equipment, or just about anything the lender deems valuable enough to accept as collateral. In some cases, cash in a bank account may even be used as collateral. It is not always necessary for the amount in the bank to equal the amount of money loaned.


Interest rates are a very important consideration when you are in the market for a secured loan. Basically, interest is a surcharge you pay to the lender that is above the principal amount borrowed. It is one way a lender earns money on the amount you borrow. It is imperative to shop for the best possible interest rate. The lower your interest rate, the lower the overall cost of your loan.

Don’t stop at merely considering the interest rate on a secured loan. Be sure to pay attention to the annual percentage rate (APR) as well. The APR combines the interest rate with other loan charges and fees, expressing this combined figure as an annual rate. When shopping for loans, comparing APRs can help you to decide which loan makes the best sense for your budget.

Pay close attention to the terms of a secured loan. Loan terms include things like repayment schedules, prepayment penalties, late fees, and reoccurring charges. You’ll also find information, regarding the increase of your interest rate, by reviewing the loan terms. For example, some lenders charge an increased interest rates if you miss a payment or pay late. Always read the small print to avoid agreeing to something you’ll regret later.

The most important thing to remember about secured loans is that fact that you do have choices. You can select the loan that makes the most sense for you financially, without agreeing to rates and terms that may harm you in the future. Before you sign a loan agreement, you are still in the driver’s seat.



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