Secured Personal Loans: Borrow Against Savings, a CD or Your Car
| Backed by | Savings, CD, share account or a vehicle |
|---|---|
| Main benefit | Easier approval and often a lower rate |
| Main risk | You can lose the collateral if you default |
| Common uses | Credit building, bad-credit borrowing, larger amounts |
| Vehicle-secured option | Title loans, where state law allows |
| Our network | $100–$5,000, by state and lender |
How a secured loan works
With an unsecured loan, the lender relies only on your promise to repay. With a secured loan, you pledge an asset as collateral. If you repay as agreed, nothing happens to the asset, and the lender releases its claim when the loan is paid off. If you default, the lender can take the collateral to cover what's owed, following the agreement and the law.
That extra security for the lender is why secured loans can help when your credit is limited or bruised: the collateral does some of the work your credit score would normally do. Compare the two in secured vs. unsecured loans.
Types of secured personal loans
| Type | Collateral | Where you get it | Good for |
|---|---|---|---|
| Share-secured loan | Money in your credit union share (savings) account | Credit unions | Building credit, low rates |
| Passbook or savings-secured loan | Money in your bank savings account | Banks | Building credit while savings stay put |
| CD-secured loan | A certificate of deposit | Banks and credit unions | Borrowing without breaking the CD early |
| Vehicle-secured loan | Your car, truck or motorcycle title | Banks, credit unions, online and title lenders | Larger amounts based on vehicle value |
With savings- and CD-secured loans, the pledged money is typically frozen until you've repaid enough, but it may keep earning interest. With vehicle-secured loans, you keep driving the car while the lender holds a lien on the title.
Pros and trade-offs
What you gain:
- Approval can be easier with bad or thin credit.
- Rates are often lower than comparable unsecured loans because the lender's risk is lower.
- Larger amounts may be available, especially with a vehicle.
- On-time payments can help build your credit if the lender reports to the bureaus.
What to weigh:
- You can lose the collateral if you don't repay.
- Savings or CD funds are tied up while the loan is open.
- Vehicle-secured loans usually require a title in your name, and lenders may check the vehicle's condition and value.
What lenders look at
- The collateral itself. For savings or a CD, the balance you can pledge. For a vehicle, its year, make, model, mileage and condition, and whether the title is in your name and free of other liens.
- Your income. Even with collateral, lenders want to see that the monthly payment fits what you earn.
- Your existing debts, which shape how large a payment is realistic.
- Credit history, which may count for less than with an unsecured loan, but can still affect your rate.
- Insurance on a vehicle, which many lenders require when a car secures the loan.
- Your state's rules on loan size and pricing; see personal loan rates by state.
How does a secured loan work for credit building?
Share-secured and savings-secured loans are popular for building or rebuilding credit. You borrow against your own money, make fixed monthly payments, and the lender reports those payments. Because the lender's risk is low, approval is usually straightforward. When the loan is repaid, your savings are released. If building credit is your main goal, also see credit builder loans, which work similarly but hold the loan money in an account until you finish paying.
Worked example: a savings-secured loan to build credit
Say you have $1,000 in savings and want to build a credit history. You pledge that $1,000 and borrow $1,000 over 12 months. At an assumed 10% APR, the payment is about $87.92 a month, about $1,055 in total, so the cost of building a year of on-time history is roughly $55 in interest.
Your savings stay in the account while you repay, and are released at payoff. If the lender reports to the bureaus, each on-time payment adds to your credit file. Actual rates vary by lender, and your offer shows the exact APR and total before you sign.
What a secured loan costs: examples
Rates depend on the lender, collateral and your profile. Here's how the payment changes on a $3,000 loan over 24 months at three sample APRs:
| APR | Monthly payment | Total repaid |
|---|---|---|
| 10% | About $138.43 | About $3,322 |
| 15% | About $145.46 | About $3,491 |
| 25% | About $160.11 | About $3,843 |
These are illustrations, not quotes. The lender shows the exact APR, payment and total before you sign. Run your own numbers with the personal loan calculator.
Using your car as collateral
If you don't have savings to pledge, your vehicle can be the collateral. Title loans, available in some states, let you borrow based on your car's value while you keep driving it. Amounts, terms and costs are set by state law and the lender. Learn more in title loans, how title loans work and collateral loans, and check your state's rules on title loan laws by state.
How to get a secured personal loan, step by step
- Choose your collateral. Savings or a CD at your bank or credit union, or a vehicle with a title in your name.
- Check its value. Know your account balance or your car's approximate value and any amount still owed on it.
- Gather documents: photo ID, Social Security number, proof of income, account statements or your vehicle title and insurance card.
- Compare offers. Look at APR, monthly payment, total repaid and what happens to the collateral at payoff.
- Sign and set up autopay so payments are never missed.
- Get your lien release or released funds after the final payment.
Common mistakes
- Pledging money you might need for an emergency while the loan is open.
- Letting required car insurance lapse.
- Borrowing more than the payment comfortably allows just because collateral makes approval easier.
- Not asking how the lien is released when the loan is paid off.
No collateral to pledge? Many lenders consider income instead. See if you qualify in about 3 minutes.
Don't have collateral? You still have options
Many borrowers qualify for an unsecured personal or installment loan based on income and banking history. Lenders in our network consider all credit types, and many focus on steady income rather than your score alone. If you'd like to see what's available without pledging anything, start there; if you'd like to use your car, title loans may be offered in your state.
Zebra Finance is a free loan-matching service, not a lender. One short form reaches lenders in our network that serve your state, for $100 to $5,000. You'll see the full terms before you sign and can decline any offer. See how it works.
See if you qualify — it takes about 3 minutes. Start your free request.
Frequently asked questions
How does a secured loan work?
You pledge an asset, such as savings, a CD or a vehicle, as collateral. You receive the loan and repay it in fixed payments. If you pay as agreed, the lender releases its claim at payoff. If you default, the lender can take the collateral under the agreement and applicable law. The collateral usually helps you qualify or get a lower rate.
What is a share secured loan?
A share secured loan is a credit union loan backed by money in your share (savings) account. The pledged amount is held while you repay, and you make fixed monthly payments. Because the credit union's risk is low, these loans often have low rates and are commonly used to build or rebuild credit.
What is a passbook loan?
A passbook loan, also called a savings-secured loan, is a bank loan backed by the money in your savings account. Your savings stay in the account, often still earning interest, but you can't withdraw the pledged amount until enough of the loan is repaid. Payments can help build credit when reported.
Is a secured loan easier to get with bad credit?
Usually, yes. The collateral lowers the lender's risk, so approval can depend less on your credit score. You'll still need to show you can repay, typically with income and a bank account. Unsecured options are also available: many lenders in our network consider all credit types and focus on income.
Can I use my car for a secured personal loan?
Yes. Some banks, credit unions and online lenders offer vehicle-secured personal loans, and title loans let you borrow against your car's value in states that allow them. You keep driving while the lender holds a lien on the title. Rules and limits vary by state.
What can be used as collateral for a personal loan?
Common collateral includes money in a savings or share account, a certificate of deposit, or a vehicle with a title in your name. Some lenders accept other assets, and pawn shops lend against items like jewelry. What a lender accepts varies, so check its requirements before applying.
Can I get a secured loan with no credit history?
Often, yes. Because the collateral lowers the lender's risk, savings- and share-secured loans are commonly used by people with no credit to start a history. You'll usually still need ID, income and a bank account. Ask whether the lender reports payments to the credit bureaus if building credit is your goal.