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Looking to build your credit? A Savings or Certificate Pledged loan may help. Pledged loans allow you to borrow against your savings or certificates of deposit (CD) without a credit check. So, even if you have little or no credit or your score needs improvement, you’re more likely to be approved. And, making all your payments on time can boost your credit score. Best of all, these loans often offer a lower interest rate than other types of credit.

How They Work

A Savings Pledged loan is fully secured by your savings account, which means that an amount equal to your loan is put on hold. When you pay down the loan, that amount is released from the hold and more funds become available to you.

A Certificate Pledged loan allows you to borrow 100 percent of your certificate’s principal balance. Certificate account funds will be on hold until the loan is paid in full. Usually, the term (or length of time you have to pay back the loan) must be equal to or sooner than when your certificate will mature. So if you have a 5-year certificate, you’ll need to pay back your loan before the end of the 5 years.

A Smart Way to Borrow

To recap, some of the best reasons a loan secured by savings may be attractive:

  • Your accounts will continue to earn dividends.
  • You’ll probably pay less interest.
  • The loan proceeds may be used for various purposes.
  • Your on-time payments can boost your credit score.
  • You don’t need a credit check to qualify.
  • You can even use it to help someone else borrow responsibly.

Navy Federal Credit Union offers members both Savings and Certificate Pledged loans. You can also set up automatic payments, so you’ll never have to worry about late payments. If you’d like to apply, visit a branch or call 1-888-842-6328 today.

This article is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.