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Should Homeowners Consider Secured Loans?

Should Homeowners Consider Secured Loans?

Dave Schneider On May 15th, 2026 • Updated on May 25th, 2026

Maintaining and improving a home can sometimes mean having to spend more money than a homeowner has on hand. In those cases, homeowners may have several options for covering costs, including secured and unsecured personal loans.

So, what is a secured loan and how is it different from an unsecured loan? Secured loans are backed with something of value that belongs to the borrower, which is called collateral. The lender may take the collateral to cover their losses if a borrower doesn’t repay a secured loan. Unsecured loans don’t require collateral.

A secured personal loan may work well for people who have a low or high credit score, or one that’s in between. However, that doesn’t mean a secured loan is always the right fit. Whether a secured personal loan is the best choice for a borrower depends on their unique financial situation and priorities.

Why should homeowners consider a secured personal loan?

A secured loan is a flexible borrowing tool that may make it easier for many people to get the money they need when they need it. As each homeowner weighs their options, they should consider the following advantages of a secured loan.

More potential borrowing power

Because providing eligible collateral reduces risk for the lender, an applicant may qualify for a higher secured loan amount than an unsecured loan amount. Checking for prequalified loan offers (which do not involve a hard credit inquiry) can give potential borrowers an idea of the secured loan amount they might qualify for before they submit a completed loan application.

Manageable interest rate

A lower interest rate may make it easier to pay off debts sooner or keep monthly payments smaller. Unlike a credit card or a line of credit, a secured loan typically has a fixed interest rate, so the borrower knows what to expect throughout the repayment period.

Predictable payment schedule

A secured loan is an installment loan, meaning it’s paid back in set increments over the course of the loan term. Because personal loan payments typically don’t change month to month, a homeowner can make sure the loan fits in their budget before finalizing the paperwork.

Alternatives to a secured personal loan

If a secured loan doesn’t seem like the right fit, a borrower may want to consider alternative financing options.

Unsecured personal loan

An unsecured personal loan doesn’t require collateral, which might make it a good option for a borrower who doesn’t feel comfortable backing the debt with a valuable possession. To qualify for an unsecured loan, an applicant may need a higher credit score than what might be needed for a secured loan. Keep in mind that the amount of an unsecured loan may be lower and the interest rate higher than what could be offered with a secured loan.

Credit card

Homeowners may consider a credit card for smaller expenses, like an emergency vet bill, or ongoing costs, like a minor home project. Depending on the credit card a homeowner chooses, they may earn rewards, like cash back or travel miles.

However, there are drawbacks. Credit card bills often fluctuate month to month, making them harder to budget for. Additionally, the interest rate may be higher than that offered with a personal loan, and using too much of the assigned credit limit may harm the consumer’s credit score.

Home Equity Line of Credit (HELOC)

A HELOC is a line of credit, similar to a credit card, that lets the homeowner borrow money, repay it and borrow again as needed, up to a credit limit. A HELOC uses the borrower’s home equity as collateral. Equity is the market value of a home minus the amount remaining to be paid on the home mortgage.

The HELOC borrower pays interest only on the amount of the line that is used. Keep in mind that a HELOC typically has a variable interest rate, which means payment amounts may fluctuate up or down. Most importantly, if a borrower can no longer make their HELOC payments, they may lose their home.

The bottom line

A secured loan is a versatile borrowing tool that might make sense in a wide range of situations for people with different credit profiles. However, it’s far from the only borrowing option. Homeowners who need financing should consider the wide range of loans and tools available in the marketplace.

Notice: Information provided in this article is for information purposes only and does not necessarily reflect the views of tribulant.com or its employees. Please be sure to consult your financial advisor about your financial circumstances and options. This site may receive compensation from advertisers for links to third-party websites.

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Dave Schneider

Dave is a serial entrepreneur who co-founded Shortlist in 2018, a marketing un-agency that serves as an outsourced dedicated marketing team. He has also co-founded Less.churn, a churn reduction app, prior to selling it in 2018. In 2012, he quit his job to travel the world, and has visited over 65 countries.