What is a Secured Loan?
In the broadest sense, a secured loan is any loan that is guaranteed by an asset—something of value the borrower pledges to the lender in order to get the loan. This is called collateral. Some of the most common collateral loans are vehicle loans and first mortgages where the vehicle or residence is pledged for the loan.
Secured loans can be backed by more than just houses and cars, they can also be backed by your own savings, whether in a share account or a share certificate. But why would someone get a loan for something when they already have the money to pay for it?
Here’s an example:
You are saving up to buy a house and you're putting away money each month into your SunWest account. Along the way, a rather large unexpected expense comes up. But you don't want use the money you are saving for a house to pay for this unrelated expense - it'll put you behind schedule for getting the house. Normally we would recommend that you get a personal loan to take care of that unexpected expense. In this case, you would have another option. You can get a share secured loan. The money you are saving for your house can be used as collateral for the loan. You'll get a lower rate compared to a traditional personal loan and you'll still be on track for saving up for the house.
When a loan is secured by a share account or a share certificate, the money in those accounts will not be available for withdrawal until the loan is paid off. But the money still earns dividends while being held as collateral for the loan.
What is the benefit of a Secured Loan?
While a Secured Loan may not be for everyone, there are a number of attractive features:
Secure Loan Options
Share Secured MasterCard
The SunWest Secured MasterCard is another excellent way to establish a credit history. Similar to a share secured loan, the proceeds can be in the form of a lower interest credit card.
Share Secured Loan
This Secured Loan uses the money in your Share Account as collateral for the loan. There's no credit check and no required qualifications.
Certificate Secured Loan
Similar to Credit Union Shares, this Secured Loan uses the money in your Share Certificate as collateral. There's still no credit check and no required qualifications.
What is a Credit Builder Loan?
A Credit Builder Loan is designed to help you establish credit or improve your current credit profile. For an upfront fee, SunWest will open a Credit Builder Loan and instead of the proceeds going directly to you, they are put into a certificate with a hold on the funds as collateral for the loan. You will make payments to the credit builder loan but once the loan is paid off, the hold is released from the certificate and the funds will be returned to you. Each month, the payment history is being reported to the credit bureau.