Having some collateral to put up will generally increase your chances of approval, though it is not a decision to take lightly. Understand that collateral means the lender can take that property and sell it as a means to recoup their losses. While I sincerely hope that you have no intention of defaulting on a loan, life does happen, so you need to be mindful of the collateral you use. You should choose collateral that will not throw a huge wrench in your life if you lose it.
Let me put it like this: collateral needs to have some value or it is of no use as collateral. A car is valuable monetarily, but it is also valuable as your vehicle. It is most likely what gets you and your family back and forth to where you all need to go. So, before putting it up as collateral, really think about it.
Do you have another vehicle you can use? If not, can you easily walk back and forth to work or take public transportation? Basically, can you continue the things you need to do without that vehicle?
Lenders may require a certain type of collateral, so you may only have the choice between using your car title or not getting the loan. If that is the case, you must simply decide if it is worth the risk. Collateral may improve your odds of getting the loan, but you do not need it hurting you in other ways.
If you are unsure of why you are not getting approved, there are ways to find out. First, when you apply and are denied, the lender is supposed to send you a letter in the mail explaining why. It might say things like, “Too many delinquent accounts”, “Judgment including bankruptcies”, “Not enough open accounts”, or something totally different. You can use these notes as a starting point.
Additionally, you can obtain your credit report for free. Once a year, you can get a free copy through each credit bureau: TransUnion, Experian, and Equifax. You want to get a copy from all three because there tends to be different things on each. To get a comprehensive view of which of the five c’s of credit need the most work, you need to see what all you are fighting against.
Also, when you get denied for credit, you have a certain amount of time to request a free copy of your report. The letter that you received from the lender will give you the information to do that. These are just two ways to keep an eye on your credit.
There are a few things that I do to keep a constant eye on mine. I am signed up with Credit Karma and CreditWise through Capital One. I love both because they alert me when something changes for better or worse on my credit. This is great because if something is not right, like a charge I did not make, I know pretty quickly and can take care of it. I also love them because they break down my credit and give me suggestions for improvement.