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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

  • Maintenance Fee

    New Fee:Details:
    Maintenance Fee We are introducing a new $5/month Maintenance Fee to all members. However, this fee can be waived if you meet just one of the following criteria: 

     • You or someone in your household has had a current loan or mortgage within the last 12 months. 
     • You or someone in your household has an open credit card 
     • You or someone in your household has an aggregate average daily balance of $3,000 in your accounts
     • You or someone in your household has a relationship with our Listerhill Financial Services department 
     • You have paid at least $125 in NSF, Transfer, or Courtesy Pay fees for the month 
     • You are under the age of 25 
     • Your account is less than 90 days old 
     • You have paid a Return Mail Fee or an Inactive Account Fee for the month
  • Jumbo Certificates Early Withdrawal Penalty

    Existing Fee:Changing To:

    Jumbo Certificates Early Withdrawal Penalty

    • Terms of 1 year or less: 30 days interest

    • Terms of over 1 year: 90 days interest

    Monthly Certificate Early Withdrawal Penalty

    • Terms of 1 year or less: 90 days interest

    • Terms of 18 mos-2 yrs: 180 days interest

    • Terms of over 2 years: 210 days interest

  • Regular Certificates Early Withdrawal Penalty

    Existing Fee:Changing To:
    Regular Certificates Early Withdrawal Penalty

     • Terms of 1 year or less: 30 days interest 
      
     • Terms of over 1 year: 90 days interest
    Quarterly Certificate Early Withdrawal Penalty 

     • Terms of 1 year or less: 90 days interest 

     • Terms of 18 mos-2yrs: 180 days interest 

     • Terms of over 2 years: 210 days interest
  • Relationship Fee

    Existing Fee:Changing To:
    Relationship Fee This fee is being eliminated. If you currently pay the $10/month Relationship Fee, you will no longer be charged this fee.
  • 60 or 72 Month Jumbo Certificate

    Existing Account:Changing To:What This Means:
    Jumbo Certificates 
    (60 month and 72 month)
    Monthly Certificate 
    (60 month)
    Certificates will now be offered in six terms instead of ten terms and a reduced minimum opening deposit of $500 is required. However, you will continue to receive the following benefits: 
     • Interest Paid Monthly 
     • Interest Paid by Deposit to Affiliate Account (Early withdrawal penalties have changed. Please see chart below.)