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Qualifying for an unsecured personal loan can be challenging if you don’t have a good credit score. If that’s the case, you might consider secured personal loans, which tend to have more flexible credit requirements since they’re backed by collateral, such as a vehicle or savings account.
Backing your personal loan with an asset may help you meet lender requirements and score a better interest rate. However, make sure you can afford to pay your loan back on time—if you fall behind, you risk losing your collateral. There aren’t many, but we’ve collected the best online auto-secured loans for bad credit, based on interest rates, loan amounts, repayment terms, customer reviews, and more.
Best Secured Loans for Bad Credit of 2023
| Company | APR | Credit Score est. | Loan Amount | More Details | |
|---|---|---|---|---|---|
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Best for Loans Secured by a Car : Upgrade
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- APR Range: 8.49% - 35.99%
- Loan Amount: $1,000 - $50,000
- Loan Terms: 24 months - 84 months
Accepts credit scores as low as 560
Long repayment terms
Direct payment to creditors for debt consolidation
Mobile app to manage loan
Origination and late payment fees
Only accepts passenger cars as collateral
High maximum APR
Upgrade made the list of best secured loans for bad credit thanks to its low credit score requirement (560), along with its flexible loan amounts and repayment terms. You can borrow $1,000 to $50,000 from Upgrade and select a loan term as long as seven years.
If you co-own your car with someone else, you can provide the co-owner’s ID and security agreement when you apply. However, you won’t have to worry about your co-owner’s credit being affected by the loan—you’ll be the only borrower and will be fully responsible for paying the loan back.
That said, Upgrade gives you the option of applying for a loan jointly with a co-borrower. In this case, Upgrade would review both your and your co-borrower’s credit, and you would both share responsibility for the loan.
Before borrowing from Upgrade, keep in mind that it charges origination fees of 1.85% to 9.99% and late payment fees of up to $10. Plus, it only accepts passenger cars as collateral, so you’re out of luck if you want to secure your loan with an RV, motorcycle, ATV, or commercial vehicle.
Upgrade offers secured personal loans in all 50 states, with the exception being residents of D.C. You can pre-qualify for a loan on its website, meaning you can check your rate with no impact on your credit score.
To apply for an auto-secured personal loan, you’ll need to provide your car’s year, make, model, trim, and current mileage. You’ll also need to provide the following documents:
- Current car registration card
- Insurance card or policy declaration
- Pay stubs
- ID
- Signed limited power of attorney forms (must be mailed)
- Car title (may or may not be needed)
Upgrade only accepts personal passenger cars that are less than 20 years old as collateral. They must be insured, free of liens or lease obligations, and have a clean title.
You can use an Upgrade secured loan for a number of purposes, including debt consolidation, building a business, home improvement, or making a large purchase.
However, there are a few restrictions. You can’t use your loan for post-secondary education, investing, gambling, or any illegal activities.
Best for Loans Secured By Other Vehicles : OneMain Financial
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- APR Range: 18.00% - 35.99%
- Loan Amount: $1,500 - $20,000
- Loan Terms: 24 months - 60 months
May accept applicants with bad credit
Multiple vehicle types can be used as collateral
Funds may be disbursed within one day of approval
May offer lower interest rate on secured loan than unsecured loan
Low loan amounts
Origination fees
High maximum APR
OneMain Financial is another lender worth exploring if you’re looking for online secured loans for bad credit. It accepts multiple types of vehicles as collateral, so you’re not limited to passenger cars alone.
OneMain’s auto-secured loans may have lower interest rates than its unsecured loans, though your rate ultimately depends on your credit history, income, expenses, debts, and other factors.
If you qualify for a loan with OneMain, you could receive your funds within one business day of approval. A couple downsides of OneMain’s secured loans, however, are the relatively low maximum loan amount of $20,000 and origination fees of 1% to 10%.
OneMain Financial provides personal loans in 44 states that you can use for a variety of purposes. The main restrictions are post-secondary expenses, investing, gambling, illegal activities, and business or commercial expenses.
When reviewing your application for a personal loan, OneMain considers the following:
- Financial history
- Credit history
- Income
- Expenses
- Loan purpose
- Whether you’ve filed for bankruptcy
- State of residence
When you apply, you’ll need to provide a copy of your ID, proof of residence, and proof of income. OneMain accepts a variety of vehicle types as collateral for a secured loan, including:
- Automobiles
- Trucks
- Motorcycles
- Boats
- Campers
- RV's
Your vehicle must be insured throughout the duration of your loan, and it will have to be appraised to ensure it has sufficient value to back the loan.
Compare the Best Secured Loans for Bad Credit of 2023
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Final Verdict
Upgrade and OneMain Financial are top choices when it comes to secured loans for bad credit. Both lenders offer flexible loan terms with rates that max out around 36%, as of publication.
Upgrade’s rates start lower than OneMain Financial’s, and it offers longer repayment terms as well. However, Upgrade only accepts passenger cars as collateral, so OneMain will be the better choice if you prefer to pledge an RV, motorcycle, or commercial vehicle.
Be sure not to borrow more than you can afford to pay back. While securing your loan with an asset can help you get a lower interest rate, you also risk losing your collateral if you can’t pay back your loan.
Guide to Choosing Secured Loans for Bad Credit
How to Get a Secured Loan With Bad Credit
If you have bad credit, you may have better chances of qualifying for a secured loan than an unsecured loan. Here are the steps you’ll need to take to get a loan:
- Pre-qualify with multiple lenders: Many lenders let you check your rates online with no impact on your credit score. If a bad credit score means you’re not matched with any offers online, it may be worth calling the lender directly to see if it’s willing to work with you.
- Provide required documentation: If you want to move forward with a loan offer, you’ll fill out an official application and provide the required documentation, such as your ID and pay stubs.
- Get your vehicle appraised: The lender may require an official appraisal of any vehicle you’re using as collateral to make sure it has sufficient value. You also may need to have your car insured throughout the duration of your loan.
- Sign your loan agreement and start repayment: If your loan application is approved, you’ll select a repayment term, sign your loan agreement, and start paying your loan back on a monthly basis.
Factors to Consider When Choosing a Secured Loan for Bad Credit
If you’re pursuing a secured loan for bad credit, consider these factors to determine the right loan for you.
- Loan amount and uses: Each lender sets its own minimum and maximum borrowing amounts, so make sure the lender can offer the loan amount you need for the car you want.
- Interest rate: Look for the lowest possible interest rate to reduce your costs of borrowing. If you have bad credit, you might get stuck with a rate on the high end of a lender’s range. However, securing your loan with collateral may reduce your rate.
- Repayment terms: Check out the repayment terms that a lender offers, as your terms directly impact your monthly payments and overall interest charges. Make sure the repayment term will work with your budget and won’t be a burden on your finances.
- Collateral requirements: If you’re pursuing a secured loan, find out what the lender’s requirements are for backing your loan with an asset. Some lenders only accept passenger vehicles, for instance, while others will let you secure your loan with an RV or motorcycle.
- Customer reviews: Finally, check out customer reviews of the lender to see what other borrowers have to say. This step can help you ensure a lender is legitimate and avoid bad actors.
Be careful about loan companies that say they don’t have any credit or income requirements. These loans may have sky-high fees and APRs, or in the worst-case scenario, could be scams.
Alternatives to Secured Loans With Bad Credit
Secured loans for bad credit aren’t the right choice in every circumstance. If you have poor credit, you might end up with a high interest rate and costly monthly payments. Secured loans can be risky, too, since you could lose your asset if you miss payments.
One alternative is an unsecured personal loan from a bank, credit union, or online lender. If you can improve your credit or apply with a creditworthy co-signer, you could qualify for a personal loan without having to put up any collateral.
Another alternative is a credit card. Some credit card companies offer introductory periods of 0% APR to new cardholders, which could be helpful to pay off a big expense over time. If you still have a balance when that promotional period ends, however, you’ll be subject to interest charges.
If you’re a homeowner, you could also consider a home equity loan or home equity line of credit (HELOC). Both of these loan types let you draw on your home’s equity and usually come with reasonable interest rates. However, these loans are secured by your home, so you risk foreclosure if you borrow more than you can afford to pay back.
Frequently Asked Questions
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What's the Difference Between Secured Loans and Unsecured Loans?
The difference between secured loans and unsecured loans is the requirement for collateral. Secured loans are backed by collateral, such as a vehicle, savings account, or other asset. Lenders may offer better interest rates and more flexible credit requirements when you back a loan with collateral.
Unsecured loans, on the other hand, are not backed by collateral. Lenders rely solely on your credit history, income, debt-to-income ratio, and other factors when determining whether you qualify for a loan. Creditworthy borrowers tend to get the lowest interest rates, while borrowers with weaker credit may be denied or may get a rate on the high end of a lender’s range.
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Can I Get a Loan With Bad Credit If I Have Collateral?
You may be able to get a loan with bad credit if you have collateral. Adding collateral to your loan lowers risk in the eyes of the lender, since your lender could recoup its losses by repossessing your asset if you default on your loan. The credit and income requirements are often more flexible for secured loans than unsecured loans.
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What Credit Score Do I Need for a Secured Personal Loan?
The credit score requirements for secured personal loans will vary by lender. Some lenders are willing to work with scores of 560 or lower. Others don’t disclose minimum credit scores, instead stating that they look at the whole picture of a borrower’s finances to determine whether they qualify for a loan.
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How Much Can I Borrow With a Secured Loan?
The amount you can borrow with a secured loan will vary by lender. Upgrade, for example, offers secured loans between $1,000 and $50,000. OneMain Financial, on the other hand, offers secured loans between $1,500 and $20,000.
Methodology
Investopedia is dedicated to providing consumers with unbiased, comprehensive reviews of personal loan lenders. To rate providers, we collected hundreds of data points across more than 40 lenders, including interest rates, fees, loan amounts, and repayment terms, to ensure that our reviews help users make informed decisions for their borrowing needs.
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