A Share-Secured Loan is a great way to build credit if you don’t have a credit history, or if you need to improve your credit score.
A share-secured loan lets you borrow money using your savings account (or CD) as collateral. The credit union “freezes” the amount you’d like to borrow. 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, we don’t need to check your credit qualifications before approving the loan. As you repay the loan, your funds become available for your use or withdrawal.
So, why not just use that cash to buy what you need? Paying in cash doesn’t build credit. But with a loan, when you make a monthly payment, it is reported to the credit bureaus. Paying on time and in full every month helps to build good credit. There are other factors that go into building credit, but on-time payments are an essential element.
Plus, with a share-secured loan, your payments are fixed. That means the same amount is due at the same time each month. Using automatic payments can make for easier budgeting.