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A collateral secured loan is a loan which has a collateral which makes it secured. People with bad credit normally are advised to take this loan to avoid more complications to their credit history. This is also one way for financial institutions to recover their cash investments. To imagine this further, it will be better to compare a collateral secured loan with a personal unsecured loan. A secured loan requires a form of collateral while an unsecured loan centers on a good faith agreement that the borrower will pay back the lender. All you need is a proof of income for an unsecured loan.

Steps in getting a personal unsecured loan:
1. Build rapport with the loan officer.
2. Secure the loan from where you have an existing account. Banks consider their existing clients on the top list to be provided with a personal loan.
3. Maintain an account. It is more advisable to keep a high maintaining balance. Clients with higher maintaining balance are perceived to be more capable of paying a borrowed sum of money.
4. Submit yourself to a credit check. This takes away any doubt on the bank about your creditability and further establishes your credit worthiness.
5. Start from small amounts. Lower payments would help you pay on time and further increase your credit score.

Steps in getting a collateral secured loan:
1. Prepare collateral. A collateral would be anything that will be of value to the bank or financial institution. This may be a car, a home equity, stocks, and other assets. The bank will provide the appraised value of the collateral and this determines the loan amount that will be approved.
2. Get a co-signer. A collateral secured loan will still require a co-signer with a good credit rating despite the secured asset being offered. The co-signer or guarantor should also understand that he becomes liable once the borrower defaults from his obligation.
3. Present a good credit report. Despite having a collateral, banks will still ask you to present your credit report. There are those who accepts borrowers with bad credit and if you are one of them, you may want to check some sites offering this type of loan online
4. Employment record. The bank will verify your status with the company you are presently connected. This forms part of the credit check that they do to the borrower.
5. Proof of Income. At least six months of pay slips will be required to establish the income capacity of the applicant.
6. Prepare down payment. There will be banks which will still require you to make a down payment before the total loan amount will be released. This normally is an advanced amount covering the interest charges that the bank will incur until such time that they have recovered the loan amount.
7. Read Terms and Conditions. You are to read and understand the terms and conditions of the contract before signing it. Make sure that you have read through it especially those in fine print to avoid disputes later on.

A collateral secured loan is more difficult to accomplish as it has more requirements as compared to an unsecured loan. The risk is even higher as there will be a possibility of losing the collateral due to default and missed payments. However, it should be looked at on a positive note that it enables you to be more careful with you accountability. Yes, it encourages accountability and establishes the right attitude towards financial management.

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