What Can Be Used As Collateral For A Personal Loan

When it comes to getting a personal loan, there are many things that can be used as collateral. This includes assets such as real estate, cars, boats, and other high-value items. However, not everyone has an asset that they can use as collateral.

If this is the case for you, don’t worry – there are still options available. Learn more about what can be used as collateral for a personal loan in this blog post.


What is loan collateral?

One of the first things you have to do when applying for a loan is putting up something as a collateral. Collateral is simply defined as an asset that can be used to pay back the debt if someone defaults on it.

The collateral is then used by the lender if the borrower defaults on repaying the loan. Collateral can be anything of significant value including but not limited to real property, personal property, equity in a company or intellectual property.

A borrower may also pledge his/her future earnings as collateral for the repayment of the debt while some lenders may require borrowers to put up some family member’s assets if they are unable to repay their debts.


Collaterals Accepted with a Personal Loan

So, where’s the best place to find good collateral for a personal loan? Here are some alternatives that could work for you:


Your Home

If your personal circumstances change and you’re now having a hard time meeting personal expenses, then you may want to use your home as collateral or even refinance it to get cash fast. It’s important that you consult first with different banks regarding interest rates available for such a type of personal loan.

This way, you will know if refinancing your home would really help ease financial problems because there are cases where the bank offers lower interest rates than any other lender, and in return, personal loan insurance will be asked.


Your car

This may be ideal collateral because it has a good resale value and is very liquid, meaning that if your personal circumstances change and you need money to meet your personal expenses, then there’s no problem in selling it at any time.

Of course, when using this as collateral, usually, the bank would ask the borrower to add another name in order for them to enjoy additional benefits such as lower interest rates or even free insurance coverage.

This way, they won’t have problems getting their money back when it comes due. Another advantage of taking this option is that the personal loan can be paid even before it’s time to be paid. Thus you can avoid additional penalties.


Your Income

This is good collateral because it’s easy to get and has a very high chance of being covered by personal loan insurance when the borrower fails to repay his/her personal loan in due time.

Most banks would not require an appraisal fee for this type of collateral because it is automatically guaranteed that your personal earnings would cover the amount needed by you as a personal loan. In addition, if this collateral is taken, then interest rates are usually lower than taking other types of personal loans such as house equity lines.


A savings account

In some cases, banks would ask borrowers to finance their personal loans from their savings account. The reason for this is that it’s the easiest personal loan to get, and personal loan insurance does not require personal collateral or because the borrower has a good credit history.

Sometimes, instead of making you pay higher for personal loans such as car equity lines, banks would ask borrowers to finance personal loans from their savings account, which earns minimal interest rates.


Your retirement fund

Banks would usually lend money to those who have little experience in borrowing money or don’t have a long enough history of perfect payments regarding their personal loans or credit cards.

This type of personal loan is a good option for a first-time borrower because he/she can borrow without having any inconvenience with things like appraisal fees and additional collateral requirements. Of course, personal loan insurance will be asked by the banks to cover personal loans granted with this type of collateral.


Your Life Insurance

This personal loan is usually used for young borrowers who are still in their prime years and capable of earning a very good income.

However, it’s not advisable to take personal loans with your life policy as collateral because most banks hire third parties to do the appraisal since they may not trust your word if you say that your life policy can really cover the amount needed by you.

If ever there is a problem regarding money, then every month, personal loan insurance has to be paid, which decreases its value over time.


Other assets

Other assets like jewelry, art pieces, and antiques can also serve as collateral for personal loans; basically, anything that is valuable and can be easily sold.

However, this personal loan type wouldn’t be covered by personal loan insurance, which makes it risky for banks to grant personal loans with personal collateral unless the borrower has good credibility in terms of making monthly payments.


Your Parent’s House

Banks and personal loan lenders would usually offer personal loans with personal collateral to borrowers who want to borrow money to buy a new house or for whatever reason, sometimes the amount needed by you is too much for personal loans without personal collateral like a personal savings account and retirement fund.

Of course, the borrower must make sure that he/she can really pay back such a type of personal loan before getting it; otherwise, banks may require additional personal collateral like your parent’s house, depending on how urgent you need cash fast.



In some countries, personal loans with personal collateral like vacant land can also be availed by borrowers, provided that banks are sure that you would really pay back every personal loan installment.

This personal loan type is a good choice for landowners who want to get quick cash without hassles, and personal loan insurance will usually not be asked when applying for such type of personal loan.


Co-Signer House Or Property

Sometimes personal loans are not granted without personal collateral unless there is someone who can take personal liability for the loan together with the borrower. This will depend on how good the co-signer’s credit rating is but usually, they will be asked to give personal collateral.

Also called a guarantor, the lender will only need a personal guarantee from them that they are willing to cover whatever amount needed by you as a personal loan in case you default.



In the event that you have personal collateral for personal loan offers or if your co-signer has personal collateral, then this is a good sign that your personal loan will be approved.

It’s a personal choice of every borrower whether to accept personal loans with personal collateral in order to get cash quickly and avoid additional fees from banks. Just make sure that you can really pay back what you need for a personal loan in a timely manner.