Member assistance program
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Here at White River Credit Union, we want to see our members financially thriving. One of the ways we help our members get back on their feet is to offer a secured loan to build credit. Let’s dig into secured loans and how they can help you get your credit score back up.

Secured loans break into a couple of main categories, shared secured loans and secured loans. The difference between them is that shared secured loans use savings (in your account) as the collateral which is held until the loan is paid off. Secured loans on the other hand, can use collateral in the form of a vehicle, home, or other asset. At White River Credit Union we offer both types of secured loans.

What is a Shared Secured Loan? Why get it?

Shared secured loans use the balance in your savings to determine the amount of a loan you can get and to back it up. Hence, a shared secured loan is easier to obtain for borrowers with weaker credit scores because it uses your own money as assurance. If you’re asking yourself, “Is a shared loan good for credit?,” the answer is “yes.” A shared secured loan is a great first step to build or rebuild your credit because instead of using your credit score, you use your own funds as collateral.

How Shared Secured Loans Work

Your credit union places a hold on the amount of money you want to borrow against in your account. When you apply for a shared secured loan, you will be given a check or a deposit into your checking account of the correct amount. Some credit unions release your funds by certain amounts as you make monthly payments on the loan while others will not allow access to the funds until the full amount of the loan is paid off. Either way, your shares will continuously earn dividends while your funds are held and your credit score should improve. Once your credit is built up, you may be able to request an unsecured loan instead of a secured one.

Secured Loans

If you own a car or other vehicle, you can use it as collateral for a secured loan. Remember that secured loans borrow against your assets, with vehicles having the lowest rate. Other collateral to keep in mind can be an RV/trailer, a home, a boat, etc. Of course, if you go the route of borrowing against your assets, make sure you have plenty of wiggle room in your budget to make the payments. Keep in mind that shared secured loans are a type of secured loan that only use funds in your savings account as the collateral.

Secured vs Unsecured Loans

It’s important to note the difference between secured loans and unsecured loans. A secured loan is based on having some form of collateral to secure the loan. Unsecured loans don’t have collateral. Some of the common unsecured loans are credit cards, student loans, and personal loans.

Also to note: There is no difference between a cash-secured and a savings secured loan to build credit because either way, the money goes into your savings account.

The benefits of secured loans:

  • Lenders are more confident they will be repaid and because the lender is taking less of a financial risk, and they tend to have lower interest rates
  • They may be a better fit for someone on a tight budget
  • Certain types of secured loans allow individuals to take tax deductions for the interest rate paid on the loan each year

Disadvantage of secured loans:

  • Your collateral will be used to pay off your loan in the event that you default on that loan

The benefits of unsecured loans:

  • There is no collateral needed to get this loan, so, theoretically, it’s a less risky loan for the borrower
  • They can also be more flexible in repayment schedules

Disadvantages to unsecured loans:

  • They are more risky for the lender, and thus charge higher interest rates unless one has great credit history
  • There are also limits to how much you can borrow based on credit history, income, and other factors

Figuring out which type of loan, secured or unsecured, is right for you can depend on your situation. White River Credit Union is happy to talk through the options with our members to find the best loan to fit your needs.

White River Credit Union Secured Loan Rates

To see all of our rates, up to date, visit our Rates Page under “Credit Card & Others.”

Remember that secured loans are a fantastic way to build up your credit score so you can save money in the future by having lower interest rates for purchases like a house or boat. Contact us today if you’d like more information to talk through the best options for you or if you want to apply for a secured loan or unsecured loan.

From Us to You

From mortgages, vehicle loans, savings, checking, business accounts, a line of credit, and more, White River Credit Union is ready to assist you in reaching your financial goals. We are proud to serve the beautiful state of Washington. Stop by soon; it’s more interesting here!

For more information on Shared Secured Loans, check out our other blog post here.

 

 

Photo by Maxi am Brunnen on Unsplash

© 2020 White River Credit Union

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