If you have been refected for a personal loan before, it could be because you didn’t have enough collateral to present to the bank if you defaulted on your loan. This doesn’t necessarily mean that you cannot receive funding, though.
As long as you can find something of value that can serve as collateral on your loan, you should be good to go when looking for personal loans online. Here are some of the types of collateral that banks accept.
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Do You Need Collateral for a Personal Loan?
Let’s talk about what types of assets could work as collateral. So what are the primary types of collateral available to people getting a loan? They include:
- Cars (at least newer ones) are often used as collateral for loans. This includes most SUVs, sedans, and trucks.
- Real estate is also frequently used as collateral for loans. This includes both residential and commercial properties. For example, you can obtain an equity loan against your home or business for just about any purpose.
- Your personal property can also be used as collateral for loans. This includes anything from jewelry to electronics to fine art. If you want to cash in hand without selling your prized possession, consider taking out a loan against it.
- Peer-to-peer loans: You might have heard of sites like Lending Club and Prosper, but these types of loans are only available to accredited investors, who must meet specific requirements.
- Small-business loans are available through lending institutions like banks and credit unions. Before applying for one, make sure to shop around since rates vary widely depending on your business’s financial health and location.
- Last but not least, many people also choose to use their life insurance policies as collateral for loans. This can be especially helpful in cases where you need cash right away but don’t have anything else of value that you can use as collateral.
You don’t have to put up any property or valuables when you get a personal loan. Instead, you can use an income stream as collateral for your loan.
How Credit scores impact your loan rate
FICO scores range from 300 to 850, with higher numbers meaning better credit. A score of 720 or above is usually a requirement for prime loans. Scores between 660 and 719 are considered near-prime. Scores below 660 are often considered subprime, but that’s not always true.
If you have strong credit and debt-to-income ratio scores, it’s possible to get multiple loans from multiple lenders. Because these companies will be competing for your business, they may offer some reasonable rates — or give you other benefits such as cash back or frequent flier miles — if you agree to apply through them.
Does Having More Than One Financial Obligation Affect My Ability to Get Approved?
According to Lantern by SoFi, having multiple debts can affect your ability to get approved for certain loans with assets as security. For example, applying for a loan with assets as safety is considered an asset-based loan. These loans typically require one monthly payment each month.
Most real estate can be used as collateral for a personal loan, but some notable exceptions are. For example, a home or vehicle is probably your best bet, but other things like jewelry and collectibles are fair game too.
