When it comes to borrowing money, there are a variety of loan options. You’re probably familiar with the popular ones like car loans, home mortgages, and credit cards. But, have you ever heard of a savings secured loan? You’re not alone if you answered no.

Savings secured loans aren’t common, but they’re one of the most affordable financing options available.

It’s helpful to distinguish what “secured” means and how it can impact you financially before jumping into the key features of this loan.


Secured Loan vs. Unsecured Loan:

  • Secured Loan
  • A loan is considered “secured” if it is backed by some form of collateral. For example, car loans and home mortgages are secured loans.
  • If you cannot repay your loan, the lender can take ownership of the collateral (repossess your car or home) to recoup their losses.
  • Because a secured loan is lower risk for lenders, it’s generally easier to get approved for this type of loan. Plus, the interest rates are lower.


  • Unsecured Loan
  • In contrast, unsecured loans do not have any collateral. Credit cards and personal loans are common examples.
  • Lenders assume greater risk without any form of collateral. As a result, the interest rates are typically higher.
  • It can be more difficult to get approved, depending on your credit history.

A savings secured loan is backed by something that has value. Therefore, you benefit from lower interest rates and easier approvals.


Characteristics of a Savings Secured Loan:

A savings secured loan is similar to a personal loan. You receive a specific amount of money upfront from the lender. Then, you make monthly payments toward the outstanding balance until the loan is paid off. The difference is that the collateral is your own money.



Instead of securing your loan with an asset, such as a car or home, the loan is backed by your own money. These funds can be from your savings account or an existing certificate (commonly called a CD.) If you cannot repay the loan, the lender will use your savings to pay it off.


Low Interest Rates

Because your own money is used to secure the loan, the interest rates are typically very low. You can see Money FCU’s current rates online. Take a minute to check what your current credit card interest is, and we guarantee a savings secured loan will be MUCH less.


Flexible Loan Terms

Similar to personal loans, you can take out longer terms if you need to. Money FCU’s savings secured loans go up to 5 years. A longer term makes a larger loan amount more affordable. Yet, if you’re borrowing a small amount, you could have it paid off in as little as a year.


No Credit Check Approvals

There’s no credit check! Since you’re using your own money as collateral, savings secured loans present practically no risk for the lender. They’re quick and simple. If you have $3,000 in your savings account, we can grant you a loan for $3,000 the same day.


Earn Interest to Offset What You’re Paying

You’re also earning interest as you pay back the loan because your money is in a savings account or certificate. Essentially, you’re cutting the loan interest rate down even more. The savings interest you earn is offsetting the loan interest you pay.


How a Savings Secured Loan Works:

Here’s an example of a savings secured loan.

Loan Amount Interest Rate Term Monthly Payment Total Interest Paid
$1,500 3.5% APR 12 Months $127.38 $28.59


Assume you need $1,500 to purchase a new refrigerator, but you don’t want to wipe out your hard-earned savings. The credit union will place a freeze (or hold) on the dollar amount you need, then make a loan with that money.

Each time you make a monthly payment of $127.38, the principal portion of the payment frees up some of your funds. Meaning, you can access some of the money in your savings again. You’re essentially paying yourself back. At the end of the term, you’ll have paid minimal interest, have a new refrigerator, and your savings will still be there!

Once the loan is repaid in full, your entire $1,500 will be unfrozen, and you will have only paid $28.59 in interest over the 12-month term. It’s an extremely affordable option when compared to credit cards.


Why Would You Get a Loan When You Have the Money?

One of the main reasons that savings secured loans aren’t popular is that they can be a bit confusing. After all, why bother with a loan if you have money in your savings? We call it, “spare your savings.”

In addition to being extremely affordable and one of the easiest loans to get approved for, they are also quite versatile. Consider the following scenarios:


Saving Money Takes a While

When you take money from your savings for a large purchase, how quickly do you return the money you used to your account? How long did it take you to save that money to begin with? Or, perhaps it was a one-time bonus. Do you really want to blow through that with one purchase? While you might have the best intentions, life happens. And those funds might not be replenished in a timely manner.

A savings secured loan forces you to return your savings balance to the original amount. So, once the loan is repaid, it’s like your savings account was never impacted.


Keep Your Emergency Fund Intact 

Remember how hard you worked to save $2,000? Suddenly, you have an unexpected expense of $1,500. It can be disheartening to watch all of your savings be erased instantly by pulling money from your account. Instead, a savings secured loan keeps your savings intact once the loan is paid off.


Boost Your Credit Score

Another use for a savings secured loan is to build or rebuild credit scores. Imagine you take out a loan for $500 at 3.5% APR for 12 months. Then, each month you make the required monthly payment. The lender reports each on-time payment to the credit bureaus. This helps boost your score!

After a year, you’ll have 12 on-time payments added to your credit history. Plus, it would only have cost you $9.53 in interest. That’s a small amount to pay for a credit score jump that could save you hundreds on your next car loan!


Teach Young Borrowers How to Handle Debt

Like the credit rebuilding strategy, many parents have their young adult children open a savings secured loan to teach money management. Before buying their first car or getting a credit card, a savings secured loan is a great way to introduce them to handling loan payments responsibly. Plus, it will help them to start building their credit score at the same time.


Borrow Money Again and Again

The beauty of a savings secured loan is that once the loan is paid off, you can borrow against it again! It acts like revolving credit, but at half the cost of a credit card.


We’re Here to Help with a Secured Loan!

As your credit union, we aim to help you make the best financial decisions. That includes introducing you to beneficial financing options you may not have considered yet.

If you’re interested in learning more about a savings secured loan or how they could work in your favor, we’re ready to help. Call, text, chat, or stop in! (315) 671-4000. Our team is available to help M-F, 9am-4pm ET.



Each individual’s financial situation is unique and readers are encouraged to contact the Credit Union when seeking financial advice on the products and services discussed. This article is for educational purposes only; the authors assume no legal responsibility for the completeness or accuracy of the contents. Rates are used as an example only.