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Can you borrow against your own money?

A savings secured loan is perfect for you. It's a low-interest loan that uses your own money as collateral. Your savings secures the loan so you can borrow the same amount that you have in your account.

moneyfcu.org - Savings Secured Loan - Money Federal Credit Union

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What is a Savings Secured Loan?

When you need to buy something, think of a Savings Secured Loan before spending the hard-earned money in your savings account. For a quick, low-rate loan, use your savings as collateral! Secured loans require collateral. For example, when you take out an auto loan, the car is used to secure the loan. The car is the collateral. Similarly, your home is considered the collateral when you get a mortgage or home equity loan. With a Savings Secured Loan, the money you already have on deposit is used as collateral.

What are the benefits of a Savings Secured Loan?

There are many reasons to choose a Savings Secured Loan. First, the rate is much lower than the average credit card or unsecured personal loan. Historically, credit cards charge much higher interest rates than a secured loan. The average credit card rate 18.34%, according to creditcards.com. A Savings Secured Loan rate is as low as 2.94%* APR. Additionally, there is no end date when you use a credit card. You could be paying for that purchase years longer than you would with a Savings Secured Loan, racking up hundreds more in interest charges. Secondly, you worked hard to build up your savings account. Why spend it all on one purchase? Borrow against it with a Savings Secured Loan. This way, when the loan is paid off with minimal interest charges, you still have your savings. You can borrow against your own money again and again. Another benefit is that you continue to earn interest on your savings while you pay back the loan. Basically, you’re cutting down the amount of interest you pay since you’re still earning money at the same time. For example, if you borrow $5,000 for 5 years at 2.94%* annual percentage rate (APR), you would pay around $193 in interest. If the $5,000 you’re borrowing against is sitting in a savings certificate with a rate of 3.25% APY, you would earn around $114. As you can see, when you subtract the interest you earned from the interest you paid, it’s only $79. That’s a bargain when you need to borrow money! Lastly, there is no credit check. Your savings, which is the collateral, is put on hold in your account. That means there is little risk to the credit union. If you default on the loan and don’t make your payments, the credit union can take the money that’s on hold. It’s a quick and easy loan that doesn’t affect your credit.

*Rate shown includes 0.25% automatic payment discount.

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How much can I borrow?

You can borrow up to the same amount of money you have on deposit. We will give you a loan equal to the amount of money you have in a savings account or savings certificate. You can borrow dollar for dollar against your savings. So, if you need $5,000, we will put that amount on hold and grant you the $5,000 loan. As the loan is paid off in monthly installments, your savings will become available for you to use. Additionally, you can use a Savings Secured Loan over and over. Once the initial loan is paid off, you can use your savings as collateral again for your next purchase. Also, you can add to the loan at any time. If you have the savings available to borrow against, you can get a loan.

Why shouldn’t I just spend my savings?

How long did it take you to build up your savings? Was it easy? Did you get a lump sum of money from a tax return or stimulus payment? That doesn’t happen very often. You certainly could use that instead of taking out a loan, but how easy would it be to save that money again? If you don’t opt for a Savings Secured Loan and simply spend your own savings, there is no guarantee you will build the savings back up. If you’re concerned that your savings won’t be available to use in case of an emergency, there is a solution for that. For example, if you need the money that is securing your loan, we can transfer the balance to a personal loan. This way, your savings will be freed up for you to use. A personal loan is based on credit and does have a higher interest rate. However, it would help you out of an emergency situation if you need cash. While this scenario is rare, we are always here to help you figure out the best solution.

Can it help me build credit?

moneyfcu.org - Savings Secured Loan - Money Federal Credit Union

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