Category: Secured Loans

Poor Credit Secured Loans

Once you’ve messed up your credit it’s no secret that your borrowing options become severely limited – some even thing non-existent. It’s not true, though. If you need to borrow some money and you’ve all but destroyed your credit, poor credit secured loans could be the path you need to take.

All forms of borrowing are a matter of risk and reward on the lenders’ side of things. Every single person they lend money to represents some risk (because there’s a possibility the person won’t repay the loan…or even make their payments on time), but also some reward (because if they do make their payments and repay the loan the bank will get its money back plus the interest on the debt). A bank stays in business and turns a profit by giving out loans to people that, on average, are going to repay the principle plus the interest.

And you – with your damaged credit – represent more risk than reward, so you need to tip the scales in your favor. That’s why you’re looking for secured loans for poor credit. By offering the bank some additional security, you’re reducing the risk you represent to them, and increasing their view of the potential reward.

What can of security do you have to offer? A person borrowing a poor credit secured loan will often use their car as security, or collateral. If you have a car that’s free and clear – and worth something on the open market – a bank can take the title of that car as collateral on your loan. If you disappear without completing your repayment, the bank can sell your car to recover their lost money, or at least part of it.

And how do they value your car as a piece of collateral? Usually they’ll look at the Kelly Blue Book value. So although you might feel your car is worth $2,000, if Kelly says it’s worth $1,200 then that’s exactly what the bank will say it’s worth in terms of collateral on your loan. Are you starting to see how these statistics (things like Blue Book value and credit score) can make or break your borrowing power?

Of course, cars aren’t the only collateral you can use to get a secured bad credit loan. You could use anything valuable, like jewelry or other personal posssessions. All that matters is your ability to show the bank that they have nothing to risk by lending you the money.