Lender Requirements for a Secured Personal Loan

What lenders will ask when applying for a secured personal loan

If you’re in the market for a secured personal loan you need to have information that will help you prepare for what to expect. You don’t want to move forward thinking you can use the funds in a savings account, furniture or jewellery to secure the loan because this is not usually acceptable as collateral for a loan.

Be prepared to ask questions

Before you make any assumptions about a lender and his policies concerning a secured personal loan, have a list of questions ready. Even if you conduct the entire transaction online, you can ask questions via telephone or email. You want to make sure what the lender wants from you. In most cases the lender wants either real estate or a motor vehicle title, but if your secured personal loan is with the same financial institution where you have your savings account, they may make an exception.

What if you don’t want to put a lien on your home or car?

If those are the only options the lender offers you as collateral for your secured personal loan, you will have to abide by the rules if you want the loan. You certainly have the option to negotiate, but in most cases the choices are limited to real estate or motor vehicles. The reason lenders choose those two forms of collateral is because people tend to pay their house payment and car payment before they pay anything else. Therefore requiring those two forms of collateral provides the lender with a better chance of on time payments especially with risky borrowers.

What about stocks, bonds and other liquid securities?

That depends on the lender, but you have to remember that using securities as collateral for a secured personal loan can be risky for the lender. These are very volatile assets that can reduce in value quickly. Certainly motor vehicles depreciate as well which I why lenders require a certain equity ratio as security for the loan. A mutual funds portfolio is less volatile because of the constant movement of funds as are FOREX accounts, but lenders still prefer real estate or motor vehicles, both of which have more liquidity and hold their value better than securities.

Don’t waste your time negotiation over the type of collateral

If the lender is adamant about the type of collateral he requires for your loan, do not attempt to negotiate too heavily or you may be denied completely. That doesn’t mean you can’t make an offer of another type of collateral, but you don’t want to become a nuisance or become argumentative. If you really want or need the loan, you will have to abide by the lender’s decision just as you would have to accept his decision regarding minimum income requirements and credit qualifications.

Even though you may think you have something better, you have to remember the ball is in the lender’s court. You can make an offer but you have no power to insist that he accept your offer of collateral. He has rules he must follow, and if you want the loan, you must abide by them as well.