How to Apply for the Best Secured-Loan Rate

A secured loan is a loan backed by collateral, such as a mortgage, automobile loan or secured credit card. The collateral can be taken by the bank or lender if you default on the loan. In the case of a secured credit card, money you have on deposit serves as collateral. The secured nature of loans often makes them easier to qualify for than unsecured loans. However, you must meet certain standards to qualify for the best rates on secured loans.

Instructions

1

Obtain a free copy of your credit report from AnnualCreditReport.com. This website was established by nationwide credit-reporting bureaus to offer free reports as required under the terms of the Fair Credit Reporting Act. Go to the website to view and print your report (see Resources). Then order your credit score separately, for a fee, by following instructions on the credit report. You're entitled to three free credit reports a year from AnnualCreditReport.com, but you must order your credit score for a fee, separately, each time.

2

Compare your credit score with generally accepted standards for outstanding credit. Privacy Rights Clearinghouse, a national nonprofit consumer-information company, says that scores of 720 or higher are generally considered excellent. That means you will likely need a score of at least 720 to get the best rates on a secured loan.

3

Apply for the secured loan if your credit score is at least 720. If it is not, create a plan for improving your credit. For help with credit repair, meet with a credit counselor. Consider counselors affiliated with a nonprofit such as Consumer Credit Counseling Services. Find a government-approved counselor by visiting the U.S. Department of Housing and Urban Development's website (see Resources). Apply for a secured loan after your credit has improved.