What’s a secured savings loan or credit repair loan?

Learn how you can build up your savings or repair your credit with a specialized loan. 

Updated

Woman reviewing loan details with a financial advisor

If you’re trying to rebuild your credit or save up some extra funds in the long term, you could benefit from a secured savings or credit repair loan. These loans report your on-time payments to the credit bureau and let you build up your savings with secured financing.

Keep reading to learn about how these innovative financial products can help you get back on track with your finances.

Refresh Financial Credit Builder Loan

Refresh Financial Credit Builder Loan

From

19.99 % APR

rate

  • 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.

  • APR: 19.99%
  • Loan amounts: $1,250-$25,000
  • Loan terms: 3-5 years
  • Fees: No administration or origination fees.
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What is a secured savings or credit repair loan?

A savings loan or credit repair loan is designed to help you grow your savings while you rebuild your credit score. This type of loan will let you borrow money that is put into a secured account, which means it won’t be immediately accessible to you. You’ll then make your repayments on your loan over several months or years.

Whenever you make an on-time payment to your lender, they’ll be responsible for reporting it to the credit bureau. This will help you to rebuild your credit and improve your overall financial health. Once you’ve paid off the loan in full, the money you’ve accumulated in your secured account will be released to you and you can use it however you want.

Compare credit builder loans

Name Product Interest Rate Max. Loan Amount Loan Term Fees Min. Credit Score
Marble Fast-Track Loan
18.99% – 24.99%
$15,000
36-84 months
Legal and admin fees of $295 - $1,500 (based on size of loan)
300
Marble Financial offer credit builder loans in amounts from $2,500 to $15,000. Improve your financial health within 36 months. This loan is strictly for borrowers exiting a consumer proposal.
Refresh Financial Credit Builder Loan
19.99%
$25,000
3-5 years
No administration or origination fees.
300
No funds are provided by Refresh upfront. Instead, funds are placed into a secured account to be accessed later. Your payments are reported to the credit bureaus, potentially impacting your credit score.
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How much will I pay for a secured savings loan or credit repair loan?

The amount you’ll pay for this type of loan is a point of contention among many borrowers since savings and credit repair loans charge interest and additional fees on any amount you borrow. With interest rates over 20% APR, this means you could end up paying $100 more per year on a $500 loan.

While these loans do cost more than what you would pay to simply transfer your loan payments directly into a savings account, they can be a good solution for people who have trouble staying accountable to their finances without external support.

And while you won’t save money upfront with these types of loans, you may be able to save money indirectly. This is because rebuilding your credit can help you get more favourable rates on future loans. You may also be more likely to keep your savings in a secured account over the long term if this is set up for you in advance.

What are the benefits of a secured savings loan or credit repair loan?

There are a number of benefits to taking out a secured savings loan or credit repair loan:

  • Build your credit. All of your on-time payments will be reported to the credit bureau, so your credit should start to improve as you pay down your loan.
  • Enhance your savings. Since you won’t have access to your money until your loan is paid off, there’s no chance you can spend it ahead of schedule.
  • Improve your discipline. If you typically have trouble saving money, it could help to have your savings locked away where you can’t reach them.
  • Open up other financing options. You may be able to use the amount you borrow as collateral for other financing options (like a secured credit card).
  • Get a better credit mix. Your credit score will go up if you have a good mix of loans, credit cards and other forms of credit.
  • No collateral required. You won’t have to put any assets (like your house or vehicle) on the line to secure your payments.
  • Bad credit doesn’t matter. You may be able to get approved for a savings loan or credit repair loan even if you have bad credit.

What should I watch out for?

  • High interest rates. You’ll typically pay interest rates between 12% and 45% APR, which can add up to hundreds or even thousands of dollars over time.
  • Additional fees. You could get stuck paying extra fees like set-up or administrative fees on top of your original loan amount.
  • Inaccessible funds. You won’t be able to access your funds until your loan is paid off, so these loans aren’t a good option if you need emergency cash.
  • Not a quick fix. There’s no guarantee that the payments you make will bring your credit score up significantly, especially if you’re behind on your payments for other debts.
  • Low borrowing amounts. You’ll usually only be able to borrow a small amount for these types of loans, particularly if your credit isn’t in good shape.

How can a credit repair loan help me improve my credit score?

This type of loan can help you to improve your credit score because your on-time payments will typically be reported to the credit bureau as soon as you make them. This means that your score will go up by a small fraction every time you put money onto your loan.

The only way your credit score won’t go up while you’re paying off a savings or credit repair loan is if you have other outstanding debts that are being left unpaid. For example, if you’re missing credit card payments or mortgage payments because you’re paying off your savings loan, then your credit will continue to go down.

What eligibility criteria do I need to meet to get this type of loan?

To get a savings loan or a credit repair loan, you’ll typically need to meet the following eligibility criteria:

Eligibility requirements

To apply for a consumer proposal loan, you usually need to meet the following 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.
  • Not have a declared bankruptcy or have insurmountable debt.

Required documents and information

  • Government-issued ID. You may have to show proof of ID, such as your driver’s licence or passport.
  • Proof of address. You’ll likely need to show that you have a permanent address by providing a utility or phone bill.
  • Proof of income. You may be required to show documents like pay stubs or letters of employment to prove that you have a steady job.
  • Bank statements. It’s possible that you’ll need to show your bank statements to demonstrate that you have money coming in to cover your payments.

What are some other ways to save and rebuild my credit?

If you’re not sure if a savings loan or a credit repair loan is the right fit for you, you might like to explore these other options to build up your savings or credit score:

  • Take out a secured credit card. You may be able to get a secured credit card, which will let you borrow against a “security deposit” so there’s no chance of defaulting.
  • Apply for a low-interest credit card. It might make more sense to get a low-interest credit card so that more of your payment goes towards your principal. Compare your low-interest credit card options here.
  • Get a co-signer on your loan. You might benefit from having a co-signer with a good credit score help you to secure financing at affordable rates.
  • Credit counselling. You might like to use a credit counselling service in your city 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.

Bottom line

A savings loan or credit repair loan lets you rebuild your credit while also putting money away for the future. The main benefit of these types of loans is that they’ll help you to get back on track with your finances if you’re disciplined in paying them off on time. The biggest downfall is that you’ll pay high interest rates and fees on any amount you borrow, which could lead you into more debt in the long run.

Frequently asked questions about secured savings loans and credit repair loans

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