Almost every kind of U.S. lender offers collateral loans: commercial banks, credit unions, online lenders, brokerage firms, and specialized finance companies all make loans backed by borrower assets. What differs is which collateral each institution prefers and how competitive their terms are. If you’re asking what banks do collateral loans, the practical answer is that your existing bank almost certainly does, but it may not be your best option depending on what you’re pledging.
Which Institutions Offer Collateral Loans
Each type of lender has a sweet spot. Matching the collateral to the right institution usually beats defaulting to whoever holds your checking account.
Commercial Banks
National and regional banks dominate real estate-secured lending. They originate the bulk of mortgages, home equity loans, and HELOCs, and they also offer secured personal loans and business lines of credit backed by equipment, inventory, or real property. If you already have a relationship with a bank and you own a home, they probably market a HELOC to you directly.
Credit Unions
Credit unions compete hard on secured lending, especially auto loans and loans secured by a share account or CD held at the credit union. Because they’re member-owned nonprofits, their rates on secured products often undercut commercial banks by a noticeable margin. They also tend to be more flexible with borrowers who have thinner credit files, so long as the collateral is solid.
Online Lenders
Online lenders have moved into secured personal loans, often accepting vehicles, CDs, or investment accounts. Applications are faster and funding can arrive in days rather than weeks. The tradeoff: they generally accept a narrower range of collateral than a full-service bank.
Brokerage Firms
Brokerages are the only source for margin loans, which let you borrow against securities in your investment account. Banks and credit unions don’t offer this product because it requires a brokerage account holding the pledged shares. Major brokerages build margin borrowing into their platforms, and turning it on can be as simple as toggling a setting.
Specialized Finance Companies
These lenders handle the more complex end of secured lending, particularly asset-based lending for businesses. They evaluate and monitor collateral like accounts receivable, inventory, and machinery on an ongoing basis. Companies that can’t qualify for a traditional bank line of credit because of inconsistent profitability often turn to ABL specialists who care more about the quality of the collateral than the income statement.
How Secured Lending Actually Works
The concept is simple. You pledge an asset, the lender advances cash, and if you stop paying the lender can take the asset. That pledge is formalized through a legal claim called a lien. For real property, the lien is recorded as a mortgage or deed of trust with the county recorder. For business assets, the lender files a UCC financing statement with the state’s Secretary of State, which puts other creditors on notice that those assets are already spoken for.1Cornell Law School. UCC Financing Statement
Because the lender has a direct path to recovering its money, secured loans carry lower interest rates than unsecured loans for the same borrower. As of early 2026, the best secured personal loan rates start around 3.50%, while average unsecured personal loan rates sit well above 12%. The size of that spread depends on your credit profile and what you pledge.
Loan-to-value ratio controls how much you can borrow against a given asset. A lower LTV means a bigger cushion for the lender and better terms for you. Federal banking regulators publish LTV ceilings by property type: 65% for raw land, 75% for land development, 80% for commercial construction, and 85% for improved property and owner-occupied residential loans.2eCFR. Appendix A to Part 628 – Loan-to-Value Limits for High Volatility Commercial Real Estate Exposures
What You Can Pledge
Real Estate
Primary residences, investment properties, and commercial buildings are the most widely accepted collateral. Lenders order an independent appraisal to establish fair market value, which typically costs $200 to $600 for a single-family home. The appraised value combined with the LTV ceiling sets the maximum loan. A home appraised at $400,000 with an 80% cap supports up to $320,000 in secured borrowing, minus any existing mortgage balance.
Liquid Financial Assets
Cash equivalents and marketable securities are the collateral lenders like most because they’re easy to value and easy to liquidate. CDs, savings accounts, money market accounts, stocks, bonds, and mutual funds all qualify. CD-secured loans, sometimes called passbook or share-secured loans at credit unions, often let you borrow up to 100% of the deposit value because the lender already holds the cash. The rate is usually a few points above whatever the CD earns, making these among the cheapest borrowing options available.
Vehicles
Cars, trucks, boats, and RVs serve as collateral for purchase financing and title loans against vehicles you already own. LTV ratios are tighter than for real estate because cars depreciate quickly. Lenders rarely advance more than the current wholesale value, and many cap advances at 80% to 90% of retail book value.
Business Assets
Accounts receivable, inventory, and equipment form the backbone of asset-based lending. Advance rates typically run up to 85% against eligible receivables and up to 60% against inventory, with the exact percentage depending on quality and aging. Equipment loans are usually structured as term loans, with the equipment itself as collateral.
Cryptocurrency
Crypto as loan collateral is emerging but still shifting. The FDIC clarified in 2025 that supervised banks may engage in crypto-related activities, including lending, without prior FDIC approval, provided they manage the associated risks.3FDIC. FDIC Clarifies Process for Banks to Engage in Crypto-Related Activities A handful of fintech lenders and crypto-native platforms already offer loans secured by Bitcoin or Ethereum. Traditional banks remain cautious. Because of price volatility, LTV ratios are conservative, often 50% or less, and margin-call-style liquidation triggers are common.
The Main Types of Collateral Loans
Secured Personal Loans
These function like any personal loan, with fixed monthly payments and a set repayment period, except you pledge an asset for better terms. Common collateral is a vehicle you own outright, a CD, or a savings account. This is often the easiest entry point into secured borrowing for someone with decent credit who wants a lower rate, or for someone whose credit is too thin for an unsecured loan.
Home Equity Loans and HELOCs
Both let you borrow against equity in your home, but they work differently. A home equity loan is a lump sum with a fixed rate and fixed payments. A HELOC works more like a credit card, with a revolving draw period followed by repayment. Combined with the first mortgage, most lenders cap total borrowing at 80% to 85% of the home’s value. Rates are far below credit cards or unsecured personal loans. The flip side is real: if you default, the lender can foreclose.
Margin Loans
Margin loans let you borrow against securities in a brokerage account. Federal Reserve Regulation T limits initial borrowing to 50% of the purchase price of the securities.4eCFR. 12 CFR Part 220 – Credit by Brokers and Dealers (Regulation T) After that, FINRA rules require at least 25% equity at all times, though most brokerages set their own maintenance threshold at 30% to 40%.5FINRA. 4210 Margin Requirements
If your portfolio drops and equity falls below the maintenance level, the brokerage issues a margin call. Something a lot of investors don’t realize: the brokerage can sell your holdings to cover the shortfall without waiting for your response or even notifying you first.6SEC.gov. Understanding Margin Accounts That forced liquidation tends to happen at the worst possible time, when the market is already falling.
Asset-Based Lines of Credit
ABL facilities give businesses a revolving line tied to the value of their current assets. As receivables come in and inventory moves, the borrowing base adjusts automatically. The structure works well for companies with seasonal swings or rapid growth that outpaces their ability to qualify for a traditional bank line.
Costs to Expect
Collateral loans carry upfront costs that unsecured loans don’t, because someone has to verify that the collateral exists, is worth what you claim, and can be legally pledged.
- Appraisal fees for residential property typically run $200 to $600. Multi-family, rural, or commercial properties cost more.
- Origination fees usually run 0.5% to 1% of the loan amount. On a $300,000 mortgage, that’s $1,500 to $3,000.
- Recording and filing fees vary by county for real estate and by state for UCC filings.
- Title search and title insurance are required on real estate loans and vary by property value and location.
Loans secured by liquid assets like CDs or savings accounts have minimal or no closing costs, because the lender already holds the collateral and valuation is automatic.
Preparing to Apply
Preparation makes or breaks the timeline. Before approaching a lender, gather proof of ownership for the collateral: a recorded deed for real estate, a clear vehicle title, or current statements for securities and CDs. You’ll also need standard financial documentation including recent tax returns and a personal financial statement showing your assets, liabilities, and income.7Fannie Mae. Tax Return and Transcript Documentation Requirements
Get your own estimate of the asset’s value before the lender orders a formal appraisal. For real estate, pull recent comparable sales. For securities, use current market value. For business assets, run an aging report on receivables. Knowing the approximate value lets you calculate your expected LTV and structure your request realistically. Asking to borrow $500,000 against a property worth $400,000 wastes everyone’s time.
The collateral has to be legally ready to pledge. Title needs to be free of major defects. Any existing lien needs to be addressed, either by having the prior lender agree to a subordinate position or by paying off that obligation at closing. Discovering title problems late is one of the most common reasons secured loans stall.
Timeline to Funding
Timing varies dramatically by collateral type. Loans secured by CDs or savings accounts at the same institution can close in days because the lender already holds and values the asset. Auto-secured loans typically take one to two weeks. Real estate-backed loans are the slowest, with appraisal, title work, and underwriting often stretching 30 to 60 days from application to funding. The appraisal alone can take two to four weeks to schedule and complete.
At closing you’ll sign a promissory note and a security agreement pledging the collateral, and the lender will record its lien publicly. Federal law requires clear written disclosure of all loan terms before closing, including the annual percentage rate, finance charges, and total payment amount.8Consumer Financial Protection Bureau. Regulation Z Section 1026.17 General Disclosure Requirements For home equity products, you generally have a three-day right to cancel after signing. After funding, expect an ongoing obligation to maintain adequate insurance on physical collateral. If coverage lapses, the lender will buy force-placed insurance at your expense, and it’s always more expensive than what you could get on your own.
Risks Worth Reading Before You Sign
Cross-Collateralization
Some lenders, especially in multi-loan relationships, include a cross-collateralization clause in the security agreement. One asset then secures more than one loan at the same time. A common example: the same bank finances your business equipment and your commercial real estate, and the loan documents pledge each asset for both loans. Defaulting on one loan can trigger default on every other loan tied to that collateral. Cross-collateralization also restricts your ability to sell or refinance the pledged asset, because a sale may require paying off all associated debts. Look for this language specifically and negotiate it out if you can.
Default and Deficiency Judgments
For federally backed loans, the lender must make reasonable efforts to reach you and discuss options before accelerating the loan or starting repossession.9eCFR. 24 CFR 201.50 – Lender Efforts to Cure the Default Many states impose their own notice-and-cure requirements. Once those windows close, the lender can seize and sell the collateral.
If the collateral sells for less than what you owe, you’re not necessarily off the hook. Under the UCC, after a lender disposes of repossessed personal property and applies the proceeds, the borrower remains liable for any remaining balance.10Cornell Law School. UCC 9-615 Application of Proceeds of Disposition; Liability for Deficiency and Right to Surplus The lender can pursue a deficiency judgment and use tools like wage garnishment or bank levies to collect. Deficiency rules after real estate foreclosure vary widely by state; some prohibit them for certain mortgages, others allow them freely.
Tax on Forgiven Balances
If the lender forgives any remaining balance after selling the collateral, the IRS generally treats that forgiven amount as taxable income, reported on Form 1099-C when it’s $600 or more.11Internal Revenue Service. Publication 4681 – Canceled Debts, Foreclosures, Repossessions, and Abandonments Exclusions exist for insolvency and bankruptcy. The qualified principal residence indebtedness exclusion, which previously sheltered forgiven mortgage debt on a primary home, expired at the end of 2025 and has not been renewed as of this writing.12Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness Congress has extended it multiple times in the past, sometimes retroactively, but borrowers shouldn’t count on that happening again.