A share-secured loan lets you borrow money using your savings account balance as collateral. The financial institution ‘freezes’ the amount you’d like to borrow from yourself. While that amount won’t be available for withdrawal, it will remain in your account and continue to earn dividends. Plus, since the funds are already on deposit, the institution doesn’t need to check your credit qualifications before making the loan.


You may ask why would a consumer need to borrow money if they already have the cash? A share-secured loan may be a good option for two types of consumers.


Building Credit
Good credit is an important part of a healthy financial future. Members who have negative or no credit history can use the share-secured option to strengthen or establish their credit history. By depositing a small amount in a savings account, for example $500, members can open a share-secured Visa Platinum card with that credit limit. We then report your repayment habits to the major credit reporting agencies. By making payments in full and on time, positive credit history will be reported over time. With good credit, a share-secured Visa can be converted to a regular Visa credit card.


Savvy Savers
The second type of consumer who may utilize a share-secured loan is someone who has worked hard to save money and doesn’t want to dip into their nest egg.


Share-secured rates typically are only 2-3% higher than the savings annual percentage yield (APY), so a share-secured loan can be a very inexpensive borrowing option, especially in a low-rate environment like we are in now. Today, members can finance a share-secured loan for as low as 2.05% APR, which means very low, affordable payments.


Share-secured borrowers aren’t limited to how they can spend the money. Spend it to remodel a bathroom, payoff other higher-rate debt, college tuition or anything you wish. As you reduce the loan balance by making payments, the unencumbered savings account balance becomes available again for withdrawal.


Share-secured loan options are often overlooked, but can be a valuable way to access cash, payoff higher-rate debt and build credit. Check out the links below or call a member service representative at (888) 858-6878, ext. 6332.


by Hemlata, AVP, Lending


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