Generous credit criteria: Savings secured lines of credit typically have less stringent underwriting criteria.As a result, they may offer more favorable interest rates than they would with unsecured credit. Competitive interest rates: When banks issue secured credit, the availability of your collateral, to the bank, means they are taking on less risk.Quick approval: Banks typically make a decision on applications within a couple of hours with a conventional loan or line of credit, a decision could take days or even weeks.Interest accrual: When you use your savings secured line of credit, your savings stay in your account, continuing to earn interest.Flexibility: You can use your line of credit for whatever you need - a monthly bill due before you receive your paycheck, an emergency car repair, or even a vacation.What Are the Benefits?Ī savings secured line of credit can be attractive for many reasons, Benefield says. "If you wanted a $5,000 line of credit, we'd make sure you had at least $5,000 in your savings account, then we'd put a hold on those funds and issue you a line of credit," continues Benefield, who says you can obtain savings secured lines of credit with as little as $250 and as much as $10,000 in a savings account. When you pay back the money and close your line of credit, the hold on your savings account is lifted until then, you can continue borrowing and repaying money. In exchange, the bank holds funds in your savings account as collateral. When you're approved for a savings secured line of credit, your bank gives you access to a pool of money that you can use to pay for minor expenses up to an established amount. "You can borrow as needed, up to your limit, then pay those funds back and draw again." Here's how it works: "A savings secured line of credit is a revolving line of credit with a variable interest rate that's secured by your savings account," explains Jackson Benefield, Vice President of Equity and Direct Product Management at Regions Bank. What Is a Savings Secured Line of Credit? Having a low score - or no score at all - can put you at a disadvantage in achieving some of your financial goals.Ī savings secured line of credit can help you build credit to achieve your goals. Likewise, good credit can help earn you a lower interest rate. You need a strong credit score to qualify for a loan or even rent an apartment. With responsible use, a savings secured line of credit can help you establish or improve your credit history.
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