What Are Collateral Loans?

Collateral loans, also known as secured loans, give borrowers the opportunity to get the money they need by pledging a piece of property as collateral for the loan.  Mortgage loans are collateral loans, for example, in which the home being purchased with the borrowed money serves as security on the financing.  There are other types of collateral loans though.  You can use the pink slip on your car, truck or van to get the cash you need as long as it is registered in your name with a wholesale value of at least $5,000. 

The nice thing about collateral loans is that you can get the money you need to pay for home and car repairs, medical bills, college tuition or any other immediate expense even if you have bad credit.  When you use your vehicle to get one of these collateral loans you can even get the cash in as little as one hour while you keep and drive your car, truck or van.  There are requirements regarding your auto insurance and employment status as well as various required documents that must be provided, but the loan process is easy compared to other financing options.

It is important to understand a few things about collateral loans before you apply.  As with any loan, these should only be used when necessary and not as a quick fix for shopping sprees and other nonessential expenditures.  The loan must be paid back as agreed, typically in monthly installments over any period up to 36 months.  Failure to pay back the debt may lead to the repossession of the property used to secure the loan.

Borrowers can qualify for collateral loans even if they have bad credit history, tax liens, past repossessions, bankruptcies and credit denials.  Unlike other subprime loans, the repayment terms are up to 36 months with no prepayment penalties, and the upfront fees are deducted from the loan.  If you find yourself in an emergency that requires fast cash, collateral loans may be the best answer.