I've come across this in my local CU where one can get a preferential interest rate by securing the full value of the loan with savings. I can understand the logic somewhat for people who find it easier to make loan repayments than save, and I understand the desire to not impact on insurance coverage, but what are the benefits of these types of loan? I think the secured rate is 5%APR and the standard rate is circa 10%. They require between 10 and 25% of the value of the loan secured by savings for the standard rate loan in any case and don't offer any interest rate discount for loans secured by 50% savings - seems a bit peculiar.
So why wouldn't someone just make a withdrawal rather than paying interest for the privilege of borrowing your own money? Am I missing something?
So why wouldn't someone just make a withdrawal rather than paying interest for the privilege of borrowing your own money? Am I missing something?