September 16, 2020

Share Secured Loans: A Quick Education on the Benefits

If you’re dipping into your savings account to pay for big purchases, you’re not only missing out on future dividends, you’re also missing an opportunity to get a low-interest rate on a personal loan. Instead, consider borrowing against your savings or certificate through a share secured loan.

You might be wondering what a share secured loan is and what makes it different from other loans. We are here to guide you through the basic definition of a share secured loan, the benefits, and how it can be used.

Let’s start with the basics. A share secured loan allows you to save on interest, continue earning dividends, and easily build credit. It is a personal loan with the collateral being the member’s savings account or a certificate. Other loans like auto, home equity, or credit cards are backed by the asset they are named after–your new car, the equity in your home, or just your approved amount based on your credit score, income, and other factors. Like credit cards, a share secured loan can be used for anything you want! There are absolutely no restrictions as to how you choose to spend the money. A share secured loan can assist in building up your savings. You might be wondering, well I haven’t been able to get approved for a credit card or auto loan so how will a share secured loan help me? The beauty of a share secured loan is that there is NO credit check to get one, and it can build up your credit score to help you get approved for a different loan in the future.

parent and child hands

Benefits

A share secured loan is backed by your Interior FCU savings or certificate account, which means less risk for us and more benefits for you:

  • Low Cost: Lower risk for us is translated to a lower interest rate for you.  Plus, your savings continue to earn dividends for the life of the loan, so it’s still making you money.
  • Predictable: Your interest rate is calculated as a fixed rate – currently 3% APR above the share rate of your savings or certificate.
  • Easy to Get Approved: Since your collateral (your savings) is already in an Interior FCU account, your application may be approved on the spot without a credit check.

Plus, a share secured loan can be used for a variety of reasons and is a great way to build your credit history.

How it works

The amount of the share secured loan can only be as much as the available balance in your certificate or your savings (plus the $25 minimum balance in your share account). Interior FCU will place a hold on the amount you want to borrow against and grant you that amount as a check or deposit. The fund amount you pledge as security remains in that account for the life of the loan. With every loan payment you make the frozen funds will be released accordingly.

Certificates: https://www.interiorfcu.org/accounts/share-certificates/

Loan Amount, Rate & Term

You can borrow up to the entire available balance of your savings or certificate account. The loan term will either be 48 months or the time remaining to maturity (for a certificate), whichever is less. The interest rate is calculated as 3.00% APR above the share rate. This works in your favor because the interest earned can help to offset the cost of your loan!

Loan Amount

Maximum is equal to available share balance

Loan Rate

APR: 3.00% Above Share Rate

Loan Term

Savings-Secured Loan: 48 months

Certificate-Secured Loan: Time remaining to maturity or 48 months, whichever is less

You’re probably thinking about how a share secured loan could help build your credit, right? Here is your answer. When you repay your loan on time, you may increase your credit score and will be better positioned to qualify for low interest rates on other loans. Every payment you make on one of these loans, it is reported to credit reporting agencies and consistent, on-time payments boosts your credit score! With an improved credit score, you could receive better interest rates on future loans which will help to save money and stay on top of loan payments. If you already have credit history but want to increase your score, you could see a smaller but worthwhile improvement, or if you don’t have a lot of credit history, a share secured loan can help you start strong.

Looking for more info? Visit our share secured loan page to learn more

See our FAQs

Get Started

To apply for a share secured loan, call us at (800) 914-8619. Our contact center is open Monday through Friday, 9:00am – 6:00pm.

Related: Signature Loans, Certificates

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