When you find yourself in a situation where you plan to take out a loan, you may feel a bit overwhelmed by all available options on the market. There are institutions with a secure and stable position, such as banks, which are the safe and most popular place to borrow money – you are almost always guaranteed to get the amount you need. However, most likely such a loan will involve a lot of paperwork, a long waiting period, and you will also be required to have a flawless credit history.

 There are also other, more modern solutions. These include primarily online loans. This is a convenient option that allows you to get the funds you need without leaving your home. Again, with online loans, your credit history matters, but if you want to save time, this solution is extremely convenient.

These are the two most popular types of loans. You will probably decide on one of them. However, it is worth knowing that they also have many sub-categories. Fixed rate loans, consolidation loans, secured loans, unsecured loans, mortgages, all online loans etc. Choosing the best option for you depends on your specific needs and financial situation. You must decide which loan is best for you. In this article, we’ll take a closer look at a secured loan. Security is often a guarantee that you will receive the amount you need.

Don’t forget to check the interest rate


When you take out a loan, you never pay back the money you borrowed. The interest rate divided into all installment payments is always added to the amount borrowed. Its size depends on many different factors: loan period, credit history, amount of money borrowed etc. All these variables play an important role, but the general rule is that the higher the risk you pose to the lender, the higher the interest rate will be. This means that if you are in a difficult financial situation – your income is not too high or you have something in your credit history that the lender doesn’t like – you will most likely have a higher interest rate. This in turn means that people in poor financial condition will get worse credit conditions than those who are more privileged.

One way to reduce the risk for the lender and get better loan terms (loan guarantee) is to secure the loan.

What is a secured loan?

What is a secured loan?

A secured loan means that you have pledged part of your assets under the loan. For the lender, the positive aspects are warranty and security, and lower interest rates for you.

How does it look in practice? If you do not make the payment within the set deadline, the lender will have the right to use the security to cover the costs. Such a loan is also much easier to obtain. In addition, you can borrow more money this way if you have collateral as an emergency solution. This, in turn, would be impossible to achieve without protection.

What you will want to use as collateral is a very important issue to consider. What will the loan repayment guarantee be for the lender? Assets that you can secure a loan with can be very different. These can include personal real estate, pay checks, personal vehicles, and even investment and valuation bills such as collectors’ items and works of art.

How can I use my car as security?

How can I use my car as security?

Most people own a car, so the most common question about secured loans is “Can I use my car as collateral?” The short answer is yes, you can, but there are a few things to consider.

First check what insurance your car has. Most insurance covers only the costs you incur in relation to the other car. And vice versa – if someone causes an accident, his insurance pays for car repairs. However, ordinary insurance usually does not cover the cost of car repairs when you caused the accident yourself. Make sure you also insure your car against these types of circumstances. Otherwise, the lender may not recognize your security if there is a risk of losing its market value in the event of an accident and without adequate insurance. You can also sign a contract with the lender, which will show that he will get money if the car is damaged.

Of course, you must remember that you cannot sell a car that is used as collateral. The lender is like a co-owner when you pay back a loan. In addition, it is highly advisable to make payments on schedule and not be late with them. If you have decided to use your car as a safeguard, you must first let the specialist assess its value. You can usually borrow up to around 50% of the value of your vehicle. After assessing the value, you can take advantage of the loan offer that suits you.