Secured loans are a type of loan that is backed by the item being purchased in the loan. In the case of a house or car loan, it's a cash amount equal to the loan or some other form of collateral. Secured loans are an alternative to an unsecured loan if you need to make up for a bad credit rating. Not all banks offer secured loan options for those with bad credit ratings, however.
Finance Departments
Talk to the business's finance department if you are buying a car or furniture, or looking for another type of loan backed by real property. Some financing departments have special bad credit loans that will probably cost you more in the end due to higher interest rates, but are not difficult to qualify for. Check for places that welcome bad credit or no credit borrowers, such as rent-to-own establishments and buy-here-pay-here auto lots.
Secured Savings Loans
Save up the loan amount in a savings or bank account over time. Check with your bank to see if it will offer you a loan in the amount of the money in your savings account so you can start to repair your credit history.
Credit Unions
Visit local credit unions and speak with the loan officers directly. Credit unions service smaller areas than many banks, and may have bad credit loans available to help out borrowers in that situation. You may also be able to convince the loan officer to offer you a starter loan to establish a credit history, either secured by a certain amount of money or completely unsecured.
CD Secured Loans
Some banks may request that you put money into a CD account instead of a normal savings account when you request a secured loan through the bank. The money in the CD account accumulates interest over time, and when you pay off the loan, you can withdraw the secured amount of money or allow the CD to mature.
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