A certificate loan is a type of loan that uses money from the borrower's account as collateral. Not only is this type of loan a great way to secure a lower interest rate, but it’s also an easy way to increase your credit score. Use the following guide to learn more about these unique loans to decide if they’re right for you and your situation.

A Guide to Certificate Loans

How They Work

The first step is to fill out an application. The lender will verify the amount of money in the account you're using to secure the loan. The application will either be approved or denied based on the account amount, as well as your credit score and history.

In most cases, the lender will require you to fill out a withdrawal form or write a check for the loan amount. These funds will be deposited into a Certificate of Deposit (CD) as collateral. The lender will keep this until the loan is repaid in full. Once the paperwork is signed, the lender will deposit the loans into your preferred account or issue you a cashier's check.

The Benefits

You can apply for a certificate loan for any reason, but they are especially helpful when an unexpected expense pops up, putting you in an unforeseen pinch. The loan typically has a fast approval time, giving you access to funds within a few days, at most.

Because it is a secured loan, borrowers with less-than-stellar credit can still qualify. Most certificate loan interest rates are lower than unsecured loan rates and are often fixed. Because the amount in a CD earns interest as long as you have the loan, you'll also be making extra money during the repayment process.

Other Considerations

A certificate loan offers an opportunity to enhance your credit score, so be sure to make all monthly payments on time. As with any loan, failure to pay will result in a violation of the terms of the agreement. You will have to forfeit the collateral, and a negative report will be sent to credit agencies.

If you have questions about whether a certificate loan is right for you, turn to Armstrong County Building & Loan Association in Ford City, PA. Since 1925, they have been providing financial services to residents throughout Armstrong County. They offer a variety of loans, including mortgages, home equity loans, and certificate-backed options, as well as deposit accounts, check cards, and safe deposit boxes. Call (724) 763-7137 to start the loan application process, or visit them online to learn more about their services.