Passbook Loans Oregon

A passbook loan is a loan from your bank or credit union, which uses the money in your savings account as collateral to guarantee the loan. In other words, if you have $5000 in your savings account and want to spend $2000, you can ask the bank to give you a $2000 passbook loan using your savings as collateral. This way your savings remain intact - although you cannot use the amount offered as collateral until it is repaid - and you continue to earn interest on the account. You repay the passbook loan by making regular repayments to the bank - but if you fail to make the payments, the bank can take the cash owed, plus costs, from your savings.

Some banks and financial institutions will allow customers to borrow up to 100 per cent of the money in their savings accounts, while others have a much lower limit allowed for passbook loans. Interest rates on the money borrowed also vary greatly depending on your bank, credit union, or financial institution; however, the interest rate payable on your passbook loan will be two or three percent higher than the interest you are receiving on your savings account.

It can take quite a long time to build up a savings account, and many people would prefer not to empty that cache and start all over again when faced with the need for a major purchase, unexpected large expense, financial emergency, or even just to buy a luxury item or holiday without leaving a financial cushion. A passbook loan allows you to keep your savings account intact by borrowing against it; your bank will advance you funds based on its policies as a passbook loan, and you make regular loan repayments as on any other loan. The difference is that you still have money earning interest in your savings account, which, of course, looks good on your total financial picture.

Some people take out a passbook loan in order to build or rebuild their credit rating. However, it is important to remember that many banks do not report passbook loans to credit agencies, so your timely repayments on your passbook loan may not appear as part of your good credit rating. It is a good idea to ask about this credit agency reporting at your financial institution before you sign on the dotted line for a passbook loan.