Types of Collateral Loans to Consider in 2022

NEW YORK - October 31, 2022 - (Newswire.com)

iQuanti: Collateral loans, also called secured loans, let you use a valuable item you own to borrow money. The lender can take this item if you don't repay, reducing their risk. As a result, collateral loans often have lenient requirements and offer larger loan amounts and lower interest rates.

There are many types of collateral loans available, and each one may suit a different type of borrower. So, in this article, we'll cover some collateral loan types to consider in 2022.

1. Title loans

Title loans let you use your vehicle title if you own the car outright and have no liens on your title. The title lender will appraise your car, then ask for proof of income and employment. Many title lenders have less strict credit score requirements, so you may get approved with poor or fair credit. 

After that, the lender will offer you a loan of 25% to 50% of your car's value. If you accept the loan offer, you can get the funds you need as soon as that same day. Many title loans are due 30 days to a few months after you get them. You get to continue driving your vehicle while the loan's outstanding, but the lender may ask for a copy of your car key.

2. Pawn shop loans

Pawn shops let you use almost anything as collateral for a fast loan. First, bring the item you want to use as collateral to the pawn store. Ideally, you go to a pawn store specializing in your item. For example, if you want to use a piece of jewelry, find a pawn store specializing in jewelry. Regardless, the pawnbroker will appraise the item and offer you a loan amount and set of terms. If you accept, you'll exchange your item for the amount and a claim ticket.

Many pawn shop loans last 30 days. You'll owe the principal plus finance charges on the due date. You'll also bring your claim ticket to the pawn store to pick up your item. If you fail to pay, the pawn store takes your item and sells it, but there are no further consequences. So, these can be good for borrowers with poor or no credit.

3. Installment loans

Installment loans let you borrow lump sums of money and repay them in predictable monthly payments at a fixed interest rate. This makes them easy to budget for, and they can be great for some borrowers who need larger loan amounts. Secured installment loans operate the same way, but require collateral. Borrowers can provide many items as collateral, from physical items like jewelry to savings accounts and more.

Many installment lenders will check your credit, but they may have less strict requirements and consider additional factors like your income and employment history. Once you get the loan, you'll make monthly payments in the loan agreement throughout the loan term. You'll get your item back once you pay off the loan.

4. Secured credit cards

Secured credit cards let you borrow money on demand up to a specified credit limit. You can then pay back the borrowed amount at your leisure. You'll need to put down a cash deposit as collateral to get a secured credit card. This amount becomes your credit limit. For example, if you put down $500 for a secured credit card, you can borrow up to $500 before repaying. Secured credit cards are very flexible and can help cover unpredictable expenses, like emergencies.

The bottom line

Secured loans can help you get more money at lower interest quite quickly. There are many kinds, each suited to different borrowers. Title loans can work well for borrowers who own their cars outright and have lien-free titles, whereas pawn shop loans are often good choices for some borrowers with poor or no credit.

Meanwhile, installment loans can work well for borrowers making larger purchases and want a predictable payment to budget for. Finally, secured credit cards can be great tools for borrowers who need a flexible loan for unexpected expenses. Regardless of which collateral loan is the right fit for you, shop with multiple lenders to get terms that work for your budget and needs.


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