Roughly 9 million Nigerian turn to short-term loans every year to help them navigate through difficult times in their lives. Home repairs, replacing a vehicle, medical expenses…

When finances are tough and you need an extra boost to get you over the hump, loans can be a helpful way to push you past today’s hardships and get you on the road to a better tomorrow.

If you’re one of the millions looking at what loan options are available to you, you’ve probably heard about collateral loans. But do you fully understand what they are?

Collateral loans are a unique loan type that gives borrowers additional ways to get the money they need. To help you better understand collateral loans and determine if they’re right for you, we’ve put together a list of 7 things you should know below.

1) Collateral Loans Are Secured

With loans, it’s common that lenders just review your credit and sometimes your income to determine your loan eligibility. This process puts pressure on lenders because if they bet incorrectly on whether or not you’ll pay them back, they’re out of luck.

Collateral loans help alleviate some of that pressure on lenders. With a collateral loan, borrowers put more skin in the game by offering a piece of property as collateral. This will help lenders more easily offer loan products since, if a borrower goes delinquent on payments, lenders can extract their money from the collateral that was offered.

Since this type of loan is more secure for lenders, a personal loan with collateral is often referred to as a secured loan.


2) You Can Get Both Big and Small Loans with Collateral

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