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What Can Be Used as Collateral for a Personal Loan?

Author: Simon Hopes
by Simon Hopes
Posted: Oct 19, 2019
personal loan

Do you qualify for a personal loan? Well, that is for the creditors to tell. But again, there are some parameters that you can use to make a self-assessment and determine whether you are eligible for loans. For instance, if your credit score is not good enough, you may not qualify for a personal loan. But this does not mean you do not have an option completely. In general, there are two main types of personal loans, secured and unsecured. In order to qualify for unsecured loans, you must have an excellent standing before lenders. This means you should have a good score and convince the lender that you are going to repay the loan amount as well as the interest charged.

This is because the lender bears a lot of risks in giving you the loan. In contrast, you can easily qualify for a secured loan because of the collateral attached to it. The interest rates on secured loans are relatively lower compared to unsecured loans. If you do not repay the loan as agreed, the lender is at liberty to take possession of the collateral and use it to recover the outstanding balances. A secured personal loan is the best way to go!

The fact that you stand to lose the asset used as collateral if you do not repay the loan is motivation to keep up with the payments. In case you are in need, you can borrow money online and compare their interest rates by visiting LoanAdvisor

In this blog, we are going to focus on one aspect of secured loans – collateral. Specifically, we are going to discuss the can be used as collateral for a personal loan. So, let us begin right away.

If you want to qualify for a secured loan easily, the quality of the asset used as collateral should be good enough to convince the lender that you will have to repay the loan to regain total ownership of the asset. Valuable material should convince the lender that there is going to be a win-win situation in the deal, even if by any chance you default. For this reason, the following are some of the common assets that you can use as collateral for a personal loan.

A home or any real estate

What is your most valuable asset? For many individuals, the most significant source of equity is actually their homes. Even those who do not own their estate outright, it is still possible to obtain a secured loan using the partial equity you have in it. Nevertheless, it is risky going down this route. Why? Remember, you are giving the lender the right to seize the home and use it to recover the outstanding loan amount in case you default the loan.

Life has a lot of turns; some turns will positively surprise you while others will devastate you. For instance, you might be in an excellent financial situation, and perhaps certain of repaying the loan in full without much struggle. But what if you lose your job? Again, what if you plagued with a very costly emergency that leaves you with no coin? We do not say something wrong will happen to you. It is good to be optimistic.

However, we also want to acknowledge the fact that there is always a risk of defaulting any time you take a loan. When you use your home as collateral, you are likely to lose it, and this something we all do not want. Therefore, even though it is easy to secure a loan using your home as collateral, consider other alternatives first.

Bank accounts

You can also use your bank as collateral for a personal loan. The funds in your account can be held as collateral. You cannot access the funds unless the loan is fully paid. But it can be quite risky to explore this option as well. This is because all the cash that you might need for other regular activities is going to be locked up.


Vehicles are often used as collateral for personal loans. While it is often used in an auto title loan, a car can still be used in other personal, loan arrangements. A loan secured by a car is much better than short term sources of funds such as payday loans. This is because these loans are relatively cheaper and have other favorable terms. Nevertheless, this is also a risky option because you can lose your vehicle if you fail to keep up with the payments.

Accounts receivables

If you are running a business, you can use the account receivables to secure a loan. You can easily qualify for personal loans if you use account receivables. Also, if you are awaiting payments, lenders can use your invoices as collateral and offer you a loan.

Personal valuables

You could be having some valuables that you just cannot lose, such as jewelry. But you can use them to secure a personal loan. This is a fantastic option, though you can also lose your valuable if you fail to make payments or default the loan.

Investment accounts

It is also possible to secure a personal loan using your investment accounts as collateral. Other investment accounts can as well be used in this regard. If you have a certificate of deposit, that is enough to get you a personal loan. Nonetheless, using this option means you cannot access the funds that you have in the account, a negative aspect in this regard.

The Bottom Line

Personal loans can help you a lot whenever you are plagued with a financial crisis. You can easily qualify for secured loans, even if you do not have credit. The asset used as collateral play a significant role when it comes to eligibility. The quality of the asset used to secure the loan is essential from the lenders' standpoints.

However, you may personally lose the asset in case you fail to make payments or default the loan. According to the law regulating lending, the lender has the right to seize the asset used as collateral to recover the outstanding balances. We have discussed several assets that can be used as collateral for a personal loan. Let us know what you think!

About the Author

With extensive research and study, Simon passionately creates blogs on divergent topics. His writings are unique and utterly grasping owing to his dedication in researching for distinctive topics.

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Author: Simon Hopes
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Simon Hopes

Member since: Feb 14, 2017
Published articles: 313

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