The Minor Cons vs. Worthwhile Pros of Collateral Loans

Consider a collateral loan in Phoenix, AZ if you need instant cash to pay for household repairs, support a loved one’s medical fees, or have sufficient funds for other emergencies. A collateral loan can fulfill your urgent financial needs without risking your home or car. In fact, 70 percent of Americans said borrowing money improved their finances.

How Collateral Loans Work

A collateral loan is a fixed amount of money you can borrow in one lump sum. Scottsdale collateral loans are secured, meaning you need to present the lender with an asset to acquire funds. Repayment terms may range from months to years with a fixed interest rate.

Applying for a collateral loan is significantly faster and easier compared to applying for a credit card or bank loan. Here at Biltmore Loan and Jewelry, all you need to do is provide your personal information and bring your collateral to our office in Phoenix or Scottsdale. We will not conduct a credit check–only a thorough checkup of your collateral to verify its authenticity and quality. If your collateral meets our quality standards, you will receive upfront cash. You will pay the same amount for a fixed number of months until your loan is paid off. Contact us for more information on interest rates and payment methods.

Advantages of Collateral Loans

Consider these pros of collateral loans if you need money fast.

  1. A perfect credit score is unnecessary

Unlike borrowing money from the bank, the rates for collateral loans do not hinge on your credit score, annual income, and debt-to-income ratio. 

Credit history is also less of an issue with collateral loans than it is with unsecured loans since using your home, vehicle, or other properties to secure the loan can lower the lender’s risk. If you have a limited credit history or do not have great credit, a collateral loan can offer you more borrowing options.

  1. Collateral loans typically have lower interest rates

Many lenders view collateral loans as less risky compared to unsecured loans. For this reason, lenders may be more willing to charge lower annual percentage rates for collateral loans than you would experience with unsecured loans.

  1. They may allow you to borrow more money

Since using an asset as collateral secures your loan, you allow lenders to recoup if you can no longer repay your debt according to the initial agreement. As such, lenders might be more open to granting you a loan for a higher amount, which, of course, will still depend on the value of your collateral.

  1. Build an impressive credit profile

If you have no credit history, a secured loan can help you build a strong credit profile. Just make sure to choose a lending business that will report your monthly payments to the main consumer credit bureaus.

Disadvantages of Collateral Loans

While a collateral loan is an excellent way to secure money fast, it is not the best option for everyone. Consider these cons of collateral loans before you make a decision. 

  1. The application process is faster but can be more complicated

Lenders need to determine the value of your luxury assets before approving you for a collateral loan. You might need to provide more information than you would for an unsecured loan. How long the process will take varies by lender.

Fortunately, Biltmore Loan and Jewelry negates this disadvantage. Our appraisal specialists can evaluate, authenticate, and provide a quote for your assets in one day. From jewelry to designer bags, request a free market appraisal today

  1. You may lose your asset if you default on a loan

If you are unable to make your minimum monthly payments on time, the lender will repossess your collateral and sell it to recoup for losses.

To are some tips to avoid losing your collateral:

Alternatives to Collateral Loans

If you are hesitant to risk your assets to get a loan in Phoenix-Scottsdale but your credit score is making it difficult to get an unsecured personal loan from a bank, consider these options:

  • Credit unions. Some nonprofit financial organizations may have less-strict requirements for unsecured personal loans. Some credit unions offer special programs for borrowers with poor credit history, too. However, you may have to be an existing member of a credit union to become eligible for loans.
  • Online lenders. Online lending may include government loans and other credit that has a similar structure to traditional bank loans. The primary difference is that the money comes from or through a different source. Furthermore, borrowing money from internet lenders may come with higher interest rates. Just remember to do your research and choose a secure online lending platform before pursuing this alternative.
  • Credit card. A secured credit card gives you the flexibility of a credit line and helps you build credit when you have little or no credit history. A Social Security Number (SSN) is the most crucial requirement most U.S. banks seek from applicants, as only people with authorization to work in the country have SSNs. To have an SSN, you must be a valid employee or professional in the United States.

Ensure to understand the pros and cons of a collateral loan (and your other options) before you make your decision. Consider the costs in interest fees and the possibility of losing your asset if you default on a loan.

The Bottom Line

Loans with collateral secure the money you are borrowing, usually at lower interest rates. If you own anything that could yield a substantial amount of cash, Biltmore Loan and jewelry can determine its market value and offer the cash you need upfront. Get an online appraisal or visit our locations in Phoenix and Scottsdale to find out how much money you can borrow with your collateral.

Are you still having problems weighing the pros and cons of collateral loans? Keep researching and figure out whether a collateral loan is right for you here.