Credit Repair – Can’t Get a Loan? Use Your Own Cash as Collateral


Can't get a Loan?

Here is a step by step way to use your own cash as collateral to build credit. First thing you need to do is save at least $500-$1000. Once you get that cash saved it's time to pick a bank. I used my local credit union when I had to get fix my credit a few years back.

Selecting a Bank

The most important thing is selecting a bank that reports to all three major credit agencies. I once made the mistake of not checking on that and did a cash as collateral loan with a credit union that only reported to Experian. Not maximizing your effort that way. Call around and ask the question. "Who do you report personal loans too?" Also ask them what the percentage interest rate is on the loan. Since it is a cash collateral loan it should be about 3-4%. Shop around for the best rate or use a bank that is convenient for you. Remember most banks want you to have an account with them to take a cash as collateral loan, so make sure you like the bank that you are choosing. Once you have found your bank it's time to pay them a visit.

Walk into the Bank

Going to the bank is the next step. Simply walk in and tell them you want to take a personal loan using your own cash as collateral. The bank representative will bring you into their office and ask you how much would like the loan for and how long is the term. I suggest doing a 12 month term and paying the loan in full by month 9. Tell them how much you would like to borrow and give them the money. Don't worry they will give it right back. If you give them $2000 cash they will turn right around and give you a check for $2000 in the form of a bank loan.

Deposit the Check

This is entirely up to you but I suggest depositing the check into the bank and set up an auto payment. As you make payments on the loan you will free up that amount of money in your bank account. If you can remain disciplined and leave the money in the bank at the end you will have double what you put up for your initial loan. Think about it! You paid the loan which freed up the money in you put up as collateral but also kept the money in the account. As you paid the loan you doubled down on savings.

Pay the Loan

Start repaying the loan immediately. You can spend the money they give you but I Do Not suggest it as previously stated. Use this credit repair tip as a way to save in addition to increasing your credit score. Don't forget this is a loan! It looks like a personal loan to the credit agencies. They do not know you put up cash as collateral to get the loan. All they see is a new loan and on time payments. Which means you obviously have to pay the loan back and on time. Failure to do so will result in a decreased credit score. That's the opposite of the point here!

Extra Information

Don't be nervous! The bank wants your money. You will not get denied when you show up to take a loan using cash as collateral. You should also know that it is not free! Note that this will cost you a little bit of money. I know you have heard it takes money to make money. Same concepts apply with credit. Takes money to repair credit. You will pay a bank fee for the loan and pay interest on the loan. A $1,000 loan will cost you about $70 so you will pay about $1,070 when it's all said and done. You can reduce some of the finance charges by paying the loan off early however you need to show at least 6-9 months of consistent on time payments in order for the credit agencies to take notice. You may also notice a slight dip in your credit score once you take the initial loan. This may happen because you increased your debt to income ratio when you first took on the full amount of the loan. You can speed this up by paying more up front in the first 3-4 months. For example (staying with a $1,000 loan) if you have a payment of $89 a month, pay $200 the first two months and $100 each month thereafter. This will have you paid in full in about 8 months.


Once the loan is paid in full repeat as needed. You can also take an additional loan a few months into the process of the initial loan. On average each cash as collateral loan can increase your credit score by 15-20 points if not more. Remember to follow the other credit steps prior to taking cash as collateral loans.  If you have 25k in negative debt a cash as collateral loan will not help as much as someone who has settled all of or a majority of their bad debt. Be sure to read all of the previous blogs to get more information about credit building and credit repair prior to taking cash as collateral loans. Thanks for Reading and I know these credit repair tips will help your financial future!

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5 thoughts on “Credit Repair – Can’t Get a Loan? Use Your Own Cash as Collateral”

    1. Yes! The credit bureaus do not know how you secured the loan. They only see the loan amount, balance and on time payments.

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