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Secured Credit and Loans
by Lisa Phillips
May 2009
by Lisa Phillips
May 2009
You can get a secured personal loan even with bad credit;
however, the real benefit in secured loans is that your credit
rating will increase with timely payments. Think of bad credit as a
temporary situation and your ultimate goal is excellent credit.
Secured credit can move you towards that goal in a short period
of time.
Types of Secured Credit and Loans
Secured Bank Loans
Most banks and credit unions offer savings secured loan. The
borrower must have a savings account with the bank and a
portion of the money in this account is used as collateral to
secure a loan. The loan equals the amount pledged to secure the
loan.
The money in the savings account is then frozen in the account
but it will continue to earn interest. As the loan is repaid the
secured portion of the savings account is freed up for use or
continued savings. This is a very low risk loan for a bank or credit
union so the interest rates should be very low on this type of loan.
Benefits of Secured Bank Loans
The major benefit of a secured loan is that payments are reported
to the major credit bureaus and those on time payments do not
show it is a secure loan. It has the same advantages of a regular
loan being reported to the credit bureaus.
Your credit report will improve and your credit scores will increase.
Secured credit is a great way to get on the rebuilding road of
credit. See "Add Piggyback Credit" to see how more than one
secured loan can quickly improve your credit scores.
however, the real benefit in secured loans is that your credit
rating will increase with timely payments. Think of bad credit as a
temporary situation and your ultimate goal is excellent credit.
Secured credit can move you towards that goal in a short period
of time.
Types of Secured Credit and Loans
Secured Bank Loans
Most banks and credit unions offer savings secured loan. The
borrower must have a savings account with the bank and a
portion of the money in this account is used as collateral to
secure a loan. The loan equals the amount pledged to secure the
loan.
The money in the savings account is then frozen in the account
but it will continue to earn interest. As the loan is repaid the
secured portion of the savings account is freed up for use or
continued savings. This is a very low risk loan for a bank or credit
union so the interest rates should be very low on this type of loan.
Benefits of Secured Bank Loans
The major benefit of a secured loan is that payments are reported
to the major credit bureaus and those on time payments do not
show it is a secure loan. It has the same advantages of a regular
loan being reported to the credit bureaus.
Your credit report will improve and your credit scores will increase.
Secured credit is a great way to get on the rebuilding road of
credit. See "Add Piggyback Credit" to see how more than one
secured loan can quickly improve your credit scores.
Bad credit can be a drag. But it doesn’t have to be a permanent state of being. Getting a
secured loan can do wonders in improving your credit score. Secured loans are loans granted
based upon some collateral. That collateral could be your savings account, certificate of
deposits, stocks, bonds, automobile, jewelry, equity in your home and any other valuable asset.
secured loan can do wonders in improving your credit score. Secured loans are loans granted
based upon some collateral. That collateral could be your savings account, certificate of
deposits, stocks, bonds, automobile, jewelry, equity in your home and any other valuable asset.
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Secured Credit Cards
A secured credit card works much like a secured bank loan. Your credit limit is determined by
the amount equal to the deposit you make. Make sure the card reports to all three major credit
bureaus and the application fee and interest rates are reasonable. Get a card that will convert
to a regular credit card after a series of on-time payments. Your credit score will benefit from a
secured credit card reporting to the credit bureaus. A Public Savings Bank’s Classic Secured
Visa® Credit Card will help you build credit history with 0% APR for 6 months and no annual
fee! See more Secured Credit Cards.
Auto Title Loans
Auto title loan companies will advance you a loan based upon the ownership of your vehicle.
No credit check is required. These companies will put a lien on your vehicle and retain your
title (ownership documents) until the loan is repaid. You must own your vehicle free and clear
and the vehicle must be in good condition.
The loan amount varies depending on the age, type and condition of the vehicle. You retain
the vehicle and are able to use it during the term of the loan. If you default on the loan, the
vehicle will be repossessed and sold for the defaulted amount. These are short term, very
expensive secured loans. Interest rates could be as much as 25% for a 30-day term loan.
Pawn Shops Loans
Pawn shops will make small, short-term loans based upon the value of personal property such
as jewelry, electronics, small appliances and even musical instruments. The pawn shop will
appraise your property and give you a small loan based upon their appraised value.
The loan term can be from 30 days to 6 months. If you do not pick up the property the pawn
shop may allow you to pay interest on the loan while they retain your personal property. The
fees are generally high and the property will be sold if you do not claim it by the end of the
loan term.
A secured credit card works much like a secured bank loan. Your credit limit is determined by
the amount equal to the deposit you make. Make sure the card reports to all three major credit
bureaus and the application fee and interest rates are reasonable. Get a card that will convert
to a regular credit card after a series of on-time payments. Your credit score will benefit from a
secured credit card reporting to the credit bureaus. A Public Savings Bank’s Classic Secured
Visa® Credit Card will help you build credit history with 0% APR for 6 months and no annual
fee! See more Secured Credit Cards.
Auto Title Loans
Auto title loan companies will advance you a loan based upon the ownership of your vehicle.
No credit check is required. These companies will put a lien on your vehicle and retain your
title (ownership documents) until the loan is repaid. You must own your vehicle free and clear
and the vehicle must be in good condition.
The loan amount varies depending on the age, type and condition of the vehicle. You retain
the vehicle and are able to use it during the term of the loan. If you default on the loan, the
vehicle will be repossessed and sold for the defaulted amount. These are short term, very
expensive secured loans. Interest rates could be as much as 25% for a 30-day term loan.
Pawn Shops Loans
Pawn shops will make small, short-term loans based upon the value of personal property such
as jewelry, electronics, small appliances and even musical instruments. The pawn shop will
appraise your property and give you a small loan based upon their appraised value.
The loan term can be from 30 days to 6 months. If you do not pick up the property the pawn
shop may allow you to pay interest on the loan while they retain your personal property. The
fees are generally high and the property will be sold if you do not claim it by the end of the
loan term.
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