If you want to build up your credit while saving money for the future, you might want to think about a secured credit savings loan. These loans (also known as credit-builder loans) report all of your on-time payments to the credit bureau to help improve your credit.
You’ll also be able to build up your savings because you won’t get access to the funds you borrow until they’re fully paid off. This means that you can re-invest or spend your funds at the end of your term without having to worry about resolving any unpaid debt.
Refresh Financial Credit Builder Loan
Refresh Financial Credit Builder Loan
Build up your credit score
Competitive interest rates
High maximum borrowing limit
Refresh Financial Credit Builder Loan
Apply today for a credit builder loan and work towards improving your financial health. Refresh Financial do not provide loan funds upfront. Instead, funds are placed into a secured account to be accessed for later use.
A secured credit savings loan lets you accumulate savings while you repair your credit score. When you take out this type of loan, any money you pay into it will go directly into a secured account (like a short-term Guaranteed Investment Certificate).
As you make your payments to your lender, it will typically report each one to the credit bureau. The credit bureau will then add points to your score, which will improve your overall financial health. Once your loan is paid off, you’ll be able to access your funds in the secured account that your lender sets up for you. At this point, you can either keep them as savings or spend them on whatever you want.
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Why do I need to build my credit?
Credit scores are used by lenders, employers and homeowners to rank consumers by how likely they are to pay their bills back on time. Lenders and credit card companies use them to decide how much money you’re eligible to borrow. They can also be a factor in whether you get approved or denied when you’re applying for a new job or a place to rent.
If you have a low credit score, you’ll likely struggle to qualify for most forms of financing. This can make it difficult to access funds if you want to purchase a home, lease a vehicle, cover emergency expenses, consolidate your debts or pay for any number of other day-to-day purchases.
When should I take out a secured credit savings loan?
You should only take out a secured credit savings loan if you feel like this could help you to rebuild your credit and set aside some much-needed savings. You might benefit from this type of loan if you meet any of the following criteria:
Secured credit savings loans can help you build up your credit score if it doesn’t meet the threshold of “good” credit (usually around 650 points). This can help you qualify for financing from traditional lenders with competitive interest rates. It can also help you avoid predatory lenders and exorbitant rates.
If you have trouble putting money away without spending it, a secured credit savings loan could help you reach your savings goals faster. With this type of loan, you won’t have access to your money until you pay your loan off. This means that you’ll get a windfall of savings at the end of your term that you can either re-invest or spend however you want.
You’ll be able to rebuild your credit score faster with a secured credit savings loan. This is because your lender will report all of your on-time payments to the credit bureau. Not all lenders do this, so it will help to rebuild your credit much faster than with a traditional loan. Once you get your score above 650, you’ll find it much easier to qualify for loans and credit cards with more favourable interest rates.
You might be able to benefit from a secured credit savings loan if you’re recovering from bankruptcy or a consumer proposal. Getting this type of loan can help you rebuild your credit report over time, even if your “bad credit” flags stay on your file for up to seven years. Once you’re out of the woods, you’ll be in better shape financially and you may be able to qualify for more loans and better rates as a result.
You’ll want to have the highest credit rating possible when you apply for your first home. This will help to make sure that you get the best possible rates on your mortgage. Getting a secured credit savings loan (or a credit-builder loan) before you apply can help you to get your credit up to a place that will let you get the best deal on your home loan.
If you can’t seem to get approved for unsecured financing, it could mean that the only way to rebuild your credit is through secured financing. This could take the form of a secured credit card or a secured credit savings loan. It could also mean you need to put up assets (like your home or vehicle) against any loan you take out to get approved.
If you have no credit history at all, it could be worthwhile for you to start building up your credit as soon as possible. The only way you’ll probably be able to do this is through a secured form of financing. A credit-builder loan can be a particularly good resource for this since it will help you to build up your credit report much faster than a traditional loan might.
What eligibility criteria do I need to meet to get this type of loan?
To get a secured credit savings loan, you’ll need to meet a number of different criteria.
Be at least 18 years old (and 19 in some provinces)
Be a citizen or resident of Canada
Have a source of consistent income
Required documents and information
Government-issued ID. You’ll be required to show proof of ID (like your driver’s licence or passport) to prove who you are.
Proof of address. You may have to show proof that you have a permanent address by providing a utility or phone bill.
Income verification. You could be required to show pay stubs and bank statements to prove that you have enough money coming in to cover your monthly payments.
Are there other ways to rebuild my credit?
If you want to take out a secured credit savings loan, there are a number of ways you can rebuild your credit.
Apply for a secured credit card. You’ll be able to qualify for a secured credit card if you put up cash as collateral to secure your balance.
Get a co-signer on your loan. You could rebuild your credit by securing a loan with a co-signer, and you’ll also be able to qualify for better rates.
Credit counselling. You might like to use a credit counselling service to look into how you can build up your credit score without having to take out another loan.
Borrowing from loved ones. Asking for a no-interest loan from family or friends could be a good option to clear out your debt if you don’t owe very much.
A secured credit savings loan can help you to rebuild your credit and save money for the future. The only downfall is that these loans come with high interest rates, which can cost you a significant amount in the long run. For this reason, it might make more sense to put your funds into a high-interest savings account.
Frequently asked questions
It depends on your financial situation. If you want to get your credit score back up, it might make sense for you to take out this type of loan. It might also be a good fit if you’re not disciplined with your savings and want a way to put money aside without having to worry about dipping into your funds early.
You’ll still need to pay interest on a secured credit savings loan, even if you’re not technically borrowing any money. These interest rates can be higher than 20% APR, which means you could end up paying up to $100 per year on a $500 loan.
While these loans cost more than a traditional savings account, they might be a good solution for you if you’re trying to rebuild your credit or you have difficulty saving money on your own.
Most credit agencies agree that a score of around 650 is considered a good enough credit score to be able to qualify for most forms of credit.
Claire Horwood is a writer at Finder, specializing in credit cards, loans and other financial products. She has a Bachelor of Arts in Gender Studies from the University of Victoria, along with an Associate's Degree in Science from Camosun College. Much of Claire's coursework has focused on writing and statistics, with a healthy dose of social and cultural analysis mixed in for good measure. She has also worked extensively in the field of "Blended Finance" with the Canadian government. In her spare time, Claire loves rock climbing, travelling and drinking inordinate amounts of coffee.
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