Should I Get a Secured Loan to Build My Credit?
Quick Answer
A secured loan can help you build credit if you make all payments on time, but since secured loans are backed by collateral, there is risk involved. Other credit products could help you build credit without as much risk.

A secured loan can help you build credit when managed responsibly, but you'll want to first make sure the loan fits your budget. Secured loans are backed by collateral, which is a valuable asset you could lose if you fall behind on payments. On top of that, missing loan payments will have a negative impact on your credit. There are other credit products that can help you build credit without as much risk.
The good news is that, if a secured loan is the right choice for you, it may be easier to get than an unsecured loan. And since a loan backed by collateral presents less financial risk to a lender, you may be offered a lower interest rate as a result.
When you choose a secured loan that you can comfortably afford, you'll get access to financing that helps you advance your goals plus the benefit of strengthened credit through on-time payments. Here's how to do it.
What Is a Secured Loan?
A secured loan is backed by collateral, an asset that acts as a guarantee against the money you borrow. Auto loans, mortgages and home equity loans are common types of secured loans. In the case of auto loans, your car is the collateral; for home equity loans and mortgages, the collateral is your home. There are also secured personal loans.
When you receive a secured loan, you'll typically make a fixed monthly payment to the lender that includes the principal and the APR you've been approved for. You'll make payments according to the loan's term. Auto loans typically have terms from 12 to 84 months, and mortgages from 10 to 30 years. When the loan is paid off, the account and your payment history will remain on your credit report.
Can a Secured Loan Help You Build Credit?
Your credit will benefit from a secured loan if you make on-time payments. Payment history accounts for 35% of your FICO® Score