Savings Secured Loans: How They Work & Benefits

If you are looking to borrow money, you may have questions about certain loan products and want to know what a savings-secured loan is. The basic definition of a savings-secured loan is a loan that is taken out by a borrower against the amount of money in his or her savings account.

Borrow Money for Any Reason

For savings-secured loans, lenders will typically grant automatic approval regardless of applicants' credit scores. Those with credit challenges are often denied an approval on a personal loan without collateral, so a savings-secured loan is a smart alternative when they need to borrow money. The funds can be used however the borrower wishes to use them--whether for unexpected expenses, debt consolidation, or any other reason. 

Rebuild Your Credit History

Using a savings-secured loan is a good strategy to rebuild your credit history and improve your credit rating. If you have saved a significant amount of money in the bank, you can borrow up to that amount, and your on-time payments towards your loan will be reported to the three major credit bureaus just as traditional loan payments would be. Over the life of the loan repayments, you could significantly improve your credit score by always making your payments on time.