Yusra3
VIP Contributor
If you have a good chunk of savings built up in a bank, you may be able to leverage those funds through something called a passbook or share-secured loan. With this type of loan, you use your existing savings balance as collateral to borrow against.
The way it works is that you'll pledge certificates of deposit, a money market account, or another savings vehicle as security for the loan amount. The bank essentially freezes those assets until you fully repay the loan.
While it may seem odd to pay interest to borrow money you already have on hand, passbook loans come with relatively low interest rates compared to other loan types since they are fully secured by your savings balance. They can provide affordable access to funds for things like debt consolidation, emergency expenses or major purchases.
However, the downside is that your savings will remain inaccessible until the loan is repaid in full. For those with substantial savings already earning interest, passbook loans offer a way to temporarily put that money to use while still collecting interest.
The way it works is that you'll pledge certificates of deposit, a money market account, or another savings vehicle as security for the loan amount. The bank essentially freezes those assets until you fully repay the loan.
While it may seem odd to pay interest to borrow money you already have on hand, passbook loans come with relatively low interest rates compared to other loan types since they are fully secured by your savings balance. They can provide affordable access to funds for things like debt consolidation, emergency expenses or major purchases.
However, the downside is that your savings will remain inaccessible until the loan is repaid in full. For those with substantial savings already earning interest, passbook loans offer a way to temporarily put that money to use while still collecting interest.
