Poor Credit Secured Loans Defined

Poor credit secured loans are one way a person with little, no, or poor credit history can obtain a loan. There are a couple of ways to get this type of loan. One common way is to take something of value into a pawn shop and borrow against that item’s value. Pawn shops do not pay very much when they buy, and they do not loan very much on held items. Part of the reason is that if they get stuck with an item, they need to be able to sell it and make a profit. Expect about ten percent value to be offered for your item. You can borrow for a term of about two weeks, and then you need to return with cash to reclaim your item. Many times, you can extend your loan term just by paying them the fee. These loans are not going to help establish your credit history because they are not reported to any credit reporting agencies.

With a bank or credit union, you may be able to set up a poor credit secured loan in a similar fashion. You will be asked to deposit, for example, five hundred dollars in a secured savings account. This money is then held for you by the bank or credit union, but you are given a credit type card (Visa or MasterCard) and can then use this card up to that amount, or limit. You make regular repayments, and your activity is reported to a credit bureau. This is a good way to start to establish a credit history. This account is similar to a credit account if it is a revolving account. You can continually borrow and repay to the account over time.

Some credit card companies offer credit card accounts to people with little or no credit history. Again, the secured accounts require an initial deposit of that limit amount, which is held by the credit card company. Once you have used this type of card for a year or so, it is time to look for a new unsecured account and get your deposit money back.

Secured loans for poor credit usually involve higher interest rates, higher fees, and so on, because they are a high risk loan for the lender to make. Once you have proven your credit worthiness, you should be able to get a better deal. They are good for starter accounts.