If your credit is thin or bruised, an unsecured loan can be hard to get. A secured personal loan can open the door, but it asks for something in return: collateral. So what actually counts as collateral, and is pledging it worth the trade?
Collateral is an asset you promise to the lender. If you stop paying, the lender can take it to recover their money. That promise lowers their risk, which can mean easier approval and a lower rate for you.
What Is a Secured Personal Loan?
A secured personal loan is backed by an asset you own. Because the lender has something to fall back on, these loans are often easier to qualify for than unsecured ones. Knowing what lenders check during personal loan underwriting can help you prepare.
The upside is real: borrowers with limited or poor credit may get approved when they otherwise would not. Rates can also be lower because the lender takes on less risk.
The downside is just as real. If you fall behind, you can lose the asset you pledged. That makes choosing the right collateral important.
Savings Accounts and CDs
Cash is the cleanest form of collateral. Many banks and credit unions offer loans secured by a savings account or a certificate of deposit, sometimes called a CD-secured or passbook loan. A CD is one of the different types of savings accounts that can double as collateral.
You keep the savings in the account, but the bank places a hold on it equal to the loan. As you repay, the hold is released. Because the lender's risk is very low, these loans often carry some of the friendliest rates.
A savings-secured loan is also a popular way to build credit, since payments are reported to the bureaus. You are essentially borrowing against your own money to show a payment history.
Vehicles
Your car, truck, or motorcycle can serve as collateral if you own it outright or have significant equity. The lender places a lien on the title until the loan is paid off. This is different from when you use a personal loan to buy a car, where the loan itself is often unsecured.
A vehicle-secured loan can unlock a larger amount than a cash-secured one, since cars hold meaningful value. But the risk is that a missed-payment streak could cost you your transportation.
Think carefully before pledging a car you rely on to get to work. Losing it can create a much bigger problem than the one the loan solved.
Other Assets Lenders May Accept
Beyond cash and cars, some lenders accept other valuables. These can include investment accounts, certain insurance policies with cash value, jewelry, or other high-value property.
Not every lender takes these, and the rules vary widely. An asset usually needs to be easy to value and easy to sell for a lender to accept it as collateral.
Retirement accounts like 401(k)s generally cannot be pledged as collateral for a personal loan, though some plans allow a separate loan against the balance. The rules differ, so verify before counting on any specific asset.
When You May Not Need Collateral
Not everyone needs to pledge an asset. Some apps and lenders offer small cash advances or unsecured options that can bridge a short gap without collateral. These work differently from traditional secured loans, and it helps to compare a personal loan vs a credit card for emergency costs first.
For example, MoneyLion offers cash advance features and financial tools designed for people building their financial footing, often without the heavy requirements of a bank loan. It can be a lighter-weight option for smaller needs. APRs and terms vary by creditworthiness, and terms and conditions apply.
MoneyLion
MoneyLion
Compare personal loan offers from top providers in minutes with no credit score impact with the MoneyLion Marketplace.
Standout feature
Soft-pull marketplace that surfaces prequalified personal loan offers from a network of lenders, with options up to $100,000 and partners that work with fair and bad credit
Fees
Free to use the marketplace
Pros
Compare multiple lender offers in minutes; soft credit pull to prequalify — no impact on your score
Cons
Final approval requires a hard pull from the chosen lender
How Much Can You Borrow Against Collateral?
Lenders rarely lend the full value of an asset. They apply a loan-to-value ratio, which means you can borrow a percentage of what the collateral is worth.
Cash-secured loans may go close to the full deposit, since cash does not lose value. A car loan might cap out well below the vehicle's market price to leave the lender a cushion.
Understanding this ratio helps you set realistic expectations. If you need a specific amount, make sure your collateral comfortably covers it. Keep in mind that applying can move your score, so it is worth knowing how applying for a personal loan affects credit.
Lighter Alternatives to Secured Loans
If you only need a small amount or want to avoid risking an asset, cash-advance and budgeting apps can help. Klover offers cash advances and tools that can smooth out cash flow between paychecks without traditional collateral. You can also explore other apps like Grant to compare limits and fees.
Another option is Brigit, which provides cash advances and budgeting features aimed at helping you avoid overdraft fees and short-term gaps. These tools are not the same as a secured loan, but for small, short-term needs they may be a simpler fit. APRs and fees vary, and terms and conditions apply.
Klover
Klover
Need cash before payday? Klover gives you instant access to up to $250 with no credit check, no interest, and no late fees. Earn points through surveys, receipt scanning, and daily activities to unlock higher advance amounts.
Standout feature
Up to $250 cash advance with no interest or credit check. Free standard delivery.
Fees
Free (optional instant delivery fee)
Pros
No interest or required fees. Quick access to cash advances. Multiple ways to earn points and unlock higher limits.
Cons
Points system can be grindy with ads and games required.
Weighing the Risks Before You Pledge
Collateral lowers the lender's risk by raising yours. The asset you pledge is on the line if your finances take a hit, so it pays to be honest about your ability to repay.
Before signing, ask yourself what happens if you lose income for a few months. If losing the collateral would create a crisis, a smaller unsecured option or a cash-advance tool may be safer.
For short-term gaps, an app like Brigit can provide a small advance without putting your savings or car at risk. Match the tool to the size and length of your need.
Brigit
Brigit
Need cash sooner than expected? Brigit is your go-to solution for instant cash. Access between $25–$500 on the free plan with no interest, no tips, and no hidden fees.
Standout feature
Trusted by over 10 million people
Fees
$8.99/mo or $15.99/mo
Pros
Get Cash in minutes, No Credit Score Needed
Cons
Monthly fee is needed
The Bottom Line
The most common collateral for a personal loan is cash in a savings account or CD, followed by vehicles, with some lenders accepting investments or other valuables. Pledging an asset can lower your rate and improve approval odds, but it puts that asset at risk if you fall behind.
For smaller or short-term needs, an unsecured cash-advance tool may be the smarter, lower-stakes choice.
Frequently Asked Questions
What is the most common collateral for a personal loan?
Cash held in a savings account or certificate of deposit is the most common and lowest-risk collateral. Vehicles are also widely accepted, and some lenders take investment accounts or other valuables.
Can I use my car as collateral for a personal loan?
Yes, if you own it outright or have significant equity. The lender places a lien on the title, and you could lose the vehicle if you stop making payments.
Does a secured personal loan have a lower interest rate?
Usually yes. Because collateral lowers the lender's risk, secured loans often carry lower rates than unsecured ones. Actual rates still vary by creditworthiness and lender.
Can I get a personal loan without collateral?
Yes. Unsecured personal loans and cash-advance apps do not require collateral, though approval and amounts may depend more heavily on your credit and income. Terms and conditions apply.
