What is a certificate secured loan?

A certificate secured loan is a type of personal loan issued by a credit union. It is backed by money the borrower deposits into a savings account or dedicated share certificate. 

These funds are inaccessible while the loan is active, although small amounts may be released as the loan is paid back. Some credit unions will issue loans equal to or up to 150% of the total deposited amount, whereas others may only issue loans equal to a certain percentage of the total funds deposited. 

Like a traditional savings account, the deposited cash collects interest while in the secured account, offsetting any interest charged on the loan. Because it’s similar to a personal loan, a certificate secured loan can help borrowers improve their credit scores and pay for medical emergencies, planned vacations, debt consolidation, weddings, and more. 

How can I get a certificate secured loan?

Technically a form of credit, personal loans are often issued by credit unions at lower interest rates than credit cards, making certificate secured loans ideal for anyone who needs some quick cash. 

How much money do I need? 

Before you get a personal loan, figure out how much money you need. Remember that personal loans must be paid back. Many financial institutions also add loan origination fees to the personal loan, which will be deducted from the loan. 

To apply for a certificate secured loan, approach a financial lender like Texas Tech Credit Union. This lender will have you complete an application. Once approved, you will receive a certificate of deposit (CD) to be held by the lender until the loan is paid in full. Make sure you provide the following information during the application process: 

  • Monthly income
  • Current debt
  • Credit rating and history
  • Personal information (e.g., mailing address, Social Security number, phone number)
  • Recent tax returns or paycheck stubs to verify proof of income and employment
  • A certificate or account form verifying your certificate of deposit

If more than one person is listed on the CD you want to pledge, their name must also appear on the loan or they will need to sign a form that permits you to secure the account. 

Check out different lenders.

Credit unions like Texas Tech Credit Union offer certificate secured loans with lower interest rates than most traditional banks. Make sure to compare all available interest rates and repayment plans. Once you have chosen your lender, review your certificate secured personal loan’s interest rate, terms, and repayment plan. You will receive the funds after you have agreed to the terms. 

What can I use a certificate secured loan for?

1. Debt consolidation

Did you know: The average US consumer holds up to $5,315 in credit card debt? Debt consolidation is a great reason to get a certificate secured loan because it can reduce debt from multiple credit cards. Consolidating debt from multiple sources into a single payment each month can help individuals pay it down faster. 

2. Unexpected emergencies

Incidents such as medical emergencies, car accidents, illnesses, or funerals can add up. In the US, a visit to the emergency room costs around $2,200. And, on average, funerals cost up to $8,000. A certificate secured loan can alleviate the financial burden of these costs.

Additional expenses may include receiving necessary dental work or surgery, travel needed for medical procedures, service animals, mental health therapy, and more. 

3. Vacations

A certificate secured loan can pay for a honeymoon, wedding, or expensive trip. Although a certificate secured loan may not be the best way to finance a fun getaway, it is generally acceptable if you have a well-defined plan to pay it back. 

4. Moving expenses

The typical cost of a moving company in the US can range from $800 to nearly $6,000. Short-distance moves can cost up to $3,000, even if you are relocating to a different home in your current city. A certificate secured loan may be the best option. 

In addition to the moving process, certificate secured loans can fund new furniture or necessities for a house or apartment. This is especially useful if you’re relocating without first obtaining a job or a steady source of income. 

Where can I get a certificate secured loan? 

A certificate secured loan is an ideal way to pay for medical emergencies, moving costs, family vacations, and more. Get started today! Click here to learn more about certificate secured loans at Texas Tech Credit Union.