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The Facts About Deposit Secured Loans

The Facts About Deposit Secured Loans

As a member of Listerhill Credit Union, you already know we’re here to help you manage your money and let it grow in the best ways possible. That typically involves wisely using only the products and services best suited to your needs and goals.

One of our most convenient products is our Deposit Secured Loans. If you’re wondering what these loans are, and if they’re for you, read on!

Here are some answers to frequently asked questions about Deposit Secured Loans.

1.) What are Deposit Secured Loans?

Listerhill offers two type of Deposit Secured Loans: Share Secured and Certificate Secured Loans. These loans work the same way, using your Share Savings account or a Share Certificate as collateral. Instead of using all your savings to make a purchase, and losing out on all future earnings and your emergency safety net, you’re borrowing against that sum while your money stays in your account. You will pay a low interest rate until the loan is paid up, all while your savings continue to earn you interest, offsetting the cost of the loan even more.

2.) How does it work?

In a Deposit Secured Loan, your credit union will place a hold on the amount you want to borrow against. There is usually a minimum and maximum of how much you can borrow with these loans. At Listerhill, we've set a minimum of $500 and maximum of 100% of your entire savings or certificate balance. After approval, we will grant you the amount you requested in the form of a check or a deposit into your checking account. You can make payments on the loan through a monthly automatic withdrawals, at any branch, or at one of our Smart ATMs.

3.) Who would benefit from a share secured loan?

While there are many benefits to a Deposit Secured Loan, borrowers with damaged credit who may not otherwise qualify for a loan stand to gain the most. Since there is minimal risk, approval can often be easier with a Deposit Secured Loan while the interest rate for the loan is at a low, predetermined amount.

4.) When will the funds I am using as collateral be available for me to use again?

At Listerhill, as you make monthly payments on your Deposit Secured Loan, we release holds on your savings equal to the principle amount of each monthly payment. In other words, as you pay off the loan, you will slowly gain back access to the savings we've been using as collateral. Regardless if the funds are held, your savings will continue to earn dividends while your funds are frozen.

5.) What are some advantages of a share secured loan?

  • Inexpensive. Interest rates on Deposit Secured Loans are calculated differently than other loans — often only 1 to 3% above the dividend rate on your savings account or certificate rate. Since your account is earning dividends throughout the life of your loan, the actual loan ends up costing you much less.
  • Convenient. Deposit Secured Loans are similar to Personal Loans in that you can use the money for anything you'd like. Once you’ve been approved for the loan, you can use the money in any way you’d like.
  • Flexible Terms. The term is how long you will pay back your loan. Since a Deposit Secured Loan holds the principle amount of the loan in your savings account or certificate as collateral, you can set up a term that works best for you.
  • Improve your credit score. Deposit Secured Loans are easy ways to start or rebound your credit journey. To really the needle move, you can use the money you’ve borrowed to pay off other outstanding loans with higher interest rates and boost your credit score.

6.) Are there any disadvantages to a share secured loan?

Though the advantages abound, don’t assume that everything about share secured loans are beneficial. Here are some factors to consider before taking out a share secured loan:

  • Increased risk to the borrower. When your own money is used as collateral, it’s your money at risk of being lost. If you can’t repay the loan, you’ll lose the funds you borrowed against.
  • Paying interest at all. If you are choosing between liquidating a savings account and borrowing against it, it is probably cheaper to empty your account because it won’t cost you anything. Borrowing always comes with interest, and even when the interest rate is favorable and the cost is offset by the dividend payments to your account, it still isn’t technically free.

We would love the opportunity to talk through all your options for your next big purchase or financial need to find the solution that works best for you and your overall financial wellness. Find out more or apply for a Deposit Secured Loan with Listerhill Credit Union today!

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Frequently Asked Questions

  • What if I get an error message when I try to enroll an email address or U.S. mobile number?

    Your email address or U.S. mobile phone number may already be enrolled with Zelle® at another bank or credit union. Call our member support team at 256.383.9204 and ask them to move your email address or U.S. mobile phone number to your financial institution so you can use it for Zelle®.

    Once customer support moves your email address or U.S. mobile phone number, it will be connected to your bank account so you can start sending and receiving money with Zelle® through your Listerhill Credit Union banking app and online banking. Please call our member support team at 256.383.9204 for help.

  • Is my information secure?

    Keeping your money and information safe is a top priority for Listerhill Credit Union. When you use Zelle® within our mobile app or online banking, your information is protected with the same technology we use to keep your bank account safe.

  • I'm unsure about using Zelle® to pay someone I don't know. What should I do?

    If you don't know the person, or aren't sure you will get what you paid for (for example, items bought from an online bidding or sales site), you should not use Zelle® for these types of transactions.

    These transactions are potentially high risk (just like sending cash to a person you don't know is high risk). Neither Listerhill Credit Union nor Zelle® offers a protection program for any authorized payments made with Zelle® – for example, if you do not receive the item you paid for or the item is not as described or as you expected.

  • Will the person I send money to be notified?

    Yes! They will receive a notification via email or text message.

  • How long does it take to receive money with Zelle®?

    Money sent with Zelle® is typically available to an enrolled recipient within minutes.3

    If you send money to someone who isn't enrolled with Zelle®, they will receive a notification prompting them to enroll. After enrollment, the money will be available directly in your recipient's account, typically within minutes.3

    If your payment is pending, we recommend confirming that the person you sent money to has enrolled with Zelle® and that you entered the correct email address or U.S. mobile phone number.

    If you're waiting to receive money, you should check to see if you've received a payment notification via email or text message. If you haven't received a payment notification, we recommend following up with the sender to confirm they entered the correct email address or U.S. mobile phone number.

    Still having trouble? Please contact our member support team at 256.383.9204.