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Your Guide to Choosing a Secured Loan


A secured loan is a loan made to you that is secured by the attachment of some form of collateral on your part. The collateral can be anything of value agreed to between you and the lender but must exceed the loan amount. Generally, the more the collateral is worth, the lower the interest payment is on the loan. As long as you make the payments as agreed, the collateral remains your possession. Default on the collateral, however and the item can be seized by the lender to cover the lost loan.

While the idea behind a secured loan is a simple one, there are a few variables to consider before taking one out. This guide should provide you with an idea of what to look for when choosing a secured loan that’s right for you. The information is valid whether you’re looking at secured loans online at MoneySupermarket or looking to borrow from a traditional brick and mortar bank located in your local area.

Choosing the Right Loan

The first thing you should look at when choosing a secured loan is the amount of collateral needed to secure the funds you need. The lender needs to ensure that the collateral is of sufficient worth to cover the loan should you default, but you need to be cautious that the collateral’s value isn’t too great for the amount being borrowed.

You wouldn’t want to secure the cost of a loan to repair your home’s roof by using the home itself as collateral, for example. The collateral should be sufficient to cover the loan amount, with an excess included to account for changes in the collateral’s value over time. Much more than that and you’ve created an unbalanced loan.

The next thing to consider is the interest rate being offered. With a secured loan the interest rate should be low, as the lender is taking little chance on making the loan. The lower the interest rate the less costly the loan, both in its total cost as well as in the cost of each loan payment.

Shop around among multiple lenders to find the lowest interest rate possible. Using an online loan processor is often the best way to find the lowest rate among multiple lenders.

If you go with an online application, always double-check your application entries before moving on to the next section of the loan application. The information you place in the application determines the final cost of the loan as well as whether you gain approval or not, so accuracy is important.

The final consideration when choosing a secured loan is making certain that the loan payments fit within your budget. Defaulting means losing your collateral, so it’s best to make certain you can afford the loan regardless of everyday financial occurrences before you sign for the funds.

You can lower loan payments by extending the repayment time, though this will raise the total cost of the loan, as you’ll be paying interest on it for a longer period.

This has been a guest post. I hope you enjoyed it!


AUTHOR Derek Sall

Derek has a Bachelor's degree in Finance and a Master's in Business. As a finance manager in the corporate world, he regularly identified and solved problems at the C-suite level. Today, Derek isn't interested in helping big companies. Instead, he's helping individuals win financially--one email, one article, one person at a time.


  1. In considering different options for a secured loan, another important factor I would like to add is the importance of research. Check and compare rates, as well as reference the company with the BBB.

  2. Secured loan is always a better option than unsecured one. But there are different situations and some situations people take out unsecured loans, but pay higher interest rates, because the lender takes a bigger risk. Taking out a loan is a process that can’t be taken lightly,that’s why I think that it’s important to consider all the points and options before making a final decision. It’s importnat to realize how much money you really need, when you can pay it off and other details. Taking out secured loans takes even more responsibility, because once the loan is secured by any kind of your property, it’s important to keep in mind that you may loose it if the loan will not be paid off.

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