While there are many loan companies in business today, a secured loan company typically does not offer signature loans and they are somewhat selective on the type of collateral they will accept to secure the loan. A secured loan company generally wants real estate or a title to a vehicle as collateral in the event the borrower defaults on the loan.

Your credit rating will play an important role in whether your loan application is approved, but your available collateral may have significant influence on the secured loan company's decision if all other qualifications are borderline. A vehicle is not considered as desirable as real estate because all vehicles depreciate while real estate has a history of appreciation, providing more security of the company being repaid.

In rare instances where a person may need a little more collateral than they have in assets, a stock portfolio or savings account may be accepted by a secured loan company. However, in most cases the interest on the loan may be higher than the interest being paid on the savings account and the borrower may not want to make that trade off.

How Much Collateral Is Enough?

The amount of collateral that a secured loan company will require to give you a loan will depend on various factors including your credit rating, your income level and the amount of the loan. Generally, a loan for about 20 percent of the value of the collateral will be needed. For instance, if you want to borrow $8,000 collateral valued at $10,000 will be needed. For those with a lower credit score, it may be higher.

You should be careful when dealing with a secured loan company who is willing to use your paid-for vehicle for collateral, especially if they are making unusual demands. There have been instances where the secured loan company has demanded not only the title, but a spare key to the vehicle as well. A few unethical companies may charge an exorbitant interest rate, knowing you will not be able to pay it back and then take possession of the car with little or no notice, depending on the state in which you live.

Unfortunately, in most states this practice, while not necessarily acceptable morally, is not illegal and people have been left owing the money for the loan as well as being without their vehicle. If you borrow from a secured loan company make sure you get the details on the payback, the interest and that you can meet the payments.