topic Re: How do shared secured loans work? in Personal Finance

How do shared secured loans work?

Anonymous — Wed, 14 Aug 2019 04:48:08 GMT

I'm looking at NFCU SSL, I see that I can do a 5-year with a minium deposit of $1,000. Let's say I took that option. How would it benefit and affect me? Do I make payments on the $1,000? At the end of my 5-year SSL, do I get $2,000? Do I pay interest or does NFCU pay interest? What would be an estimated monthly payment?

Re: How do shared secured loans work?

AllZero — Wed, 14 Aug 2019 05:19:41 GMT

First rule of SSL. Don't ask all kinds of questions to the CSRs. Don't burn that bridge. If you have questions. Ask it here.

Here are primers:
https://ficoforums.myfico.com/t5/Personal-Finance/NFCU-SSL/m-p/5295063

https://ficoforums.myfico.com/t5/Understanding-FICO-Scoring/Adding-an-installment-loan-the-Share-Secure-technique/td-p/4506756

https://ficoforums.myfico.com/t5/Personal-Finance/The-Quest-for-an-SSL-alternative-to-Alliant/m-p/5162448

Re: How do shared secured loans work?

AllZero — Wed, 14 Aug 2019 05:45:44 GMT

1. You'll need $3001 minimum for the 5 year SSL. $3010 to be safe.
2. You get the funds back as soon as you pay down to 8.9%
3. Yes, you pay interest on the open loan whatever amount that might be when interest is calculated.

ETA This is your money you are using; hence, secure. You are not doubling your money. You're not using their money.

Re: How do shared secured loans work?

Anonymous — Wed, 14 Aug 2019 05:57:20 GMT

@AllZero wrote:
1. You'll need $3001 minimum for the 5 year SSL. $3010 to be safe.
2. You get the funds back as soon as you pay down to 8.9%
3. Yes, you pay interest on the open loan whatever amount that might be when interest is calculated.

ETA This is your money you are using; hence, secure. You are not doubling your money. You're not using their money.

That's what i'm not understanding. If I put in the $3010, but then I have to make payments until I hit $3010 right? So wouldn't there be $6020 at the end?

What is the difference between (above) and (below)?

Re: How do shared secured loans work?

AllZero — Wed, 14 Aug 2019 05:58:30 GMT

That is a certificate.

Click here https://www.navyfederal.org/products-services/loans/personal-loans/personal-loans.php

Re: How do shared secured loans work?

Anonymous — Wed, 14 Aug 2019 06:15:23 GMT

So SSL are basically forms of paying for credit history?

Re: How do shared secured loans work?

AllZero — Thu, 15 Aug 2019 07:07:33 GMT

@Anonymous wrote:
@AllZero wrote:
1. You'll need $3001 minimum for the 5 year SSL. $3010 to be safe.
2. You get the funds back as soon as you pay down to 8.9%
3. Yes, you pay interest on the open loan whatever amount that might be when interest is calculated.

ETA This is your money you are using; hence, secure. You are not doubling your money. You're not using their money.
That's what i'm not understanding. If I put in the $3010, but then I have to make payments until I hit $3010 right? So wouldn't there be $6020 at the end?

You put in $3010 of your own money into the SSL account. They give you back $3010 immediately. They will freeze the SSL funds until you pay it back. Use the funds they gave you to pay back and down the SSL account to 8.9% ($2742.11). The unfrozen funds will return back into your account. The rest will be frozen to keep the account open. Set up autopay for a few dollars to keep account active. Each autopay will return the unfrozen funds back into your account, whichever amount that you set up autopay for.

Re: How do shared secured loans work?

AllZero — Wed, 14 Aug 2019 06:26:22 GMT

@Anonymous wrote:
So SSL are basically forms of paying for credit history?

Yes.

Re: How do shared secured loans work?

SouthJamaica — Wed, 14 Aug 2019 10:49:36 GMT

@Anonymous wrote:
@AllZero wrote:
1. You'll need $3001 minimum for the 5 year SSL. $3010 to be safe.
2. You get the funds back as soon as you pay down to 8.9%
3. Yes, you pay interest on the open loan whatever amount that might be when interest is calculated.

ETA This is your money you are using; hence, secure. You are not doubling your money. You're not using their money.
That's what i'm not understanding. If I put in the $3010, but then I have to make payments until I hit $3010 right? So wouldn't there be $6020 at the end?

What is the difference between (above) and (below)?

Initially yes, but I just make the payments via transfer back from the savings account, so the amount on hand goes down as the loan goes down.

Re: How do shared secured loans work?

Anonymous — Wed, 14 Aug 2019 23:17:05 GMT

I don't see how it would be benficial :\ oh well. Paying $3,000 for history is absurd.

Re: How do shared secured loans work?

AllZero — Wed, 14 Aug 2019 23:31:10 GMT

@Anonymous wrote:
I don't see how it would be benficial :\ oh well. Paying $3,000 for history is absurd.

How are you arriving at that number?

Re: How do shared secured loans work?

Anonymous — Thu, 15 Aug 2019 01:00:28 GMT

@AllZero wrote:
@Anonymous wrote:
I don't see how it would be benficial :\ oh well. Paying $3,000 for history is absurd.
How are you arriving at that number?

$3k down and then $3k in payments, they profit 100%..?

Re: How do shared secured loans work?

AllZero — Thu, 15 Aug 2019 01:11:39 GMT

@Anonymous wrote:
$3k down and then $3k in payments, they profit 100%..?

See message 5. It's only 2.25% APR. Total finance charge will be less once you pay down to 8.9%.

See message 7. Let me know if you need clarification.

Go here for clarification. https://ficoforums.myfico.com/t5/Personal-Finance/NFCU-SSL/m-p/5653849

See message 11 and 28

Re: How do shared secured loans work?

Jnbmom — Thu, 15 Aug 2019 02:15:58 GMT

Re read how the "SSL" works, it has been explained in detail??

Re: How do shared secured loans work?

Anonymous — Thu, 15 Aug 2019 03:16:59 GMT

@AllZero wrote:
@Anonymous wrote:
$3k down and then $3k in payments, they profit 100%..?
See message 5. It's only 2.25% APR. Total finance charge will be less once you pay down to 8.9%.

See message 7. Let me know if you need clarification.

Go here for clarification. https://ficoforums.myfico.com/t5/Personal-Finance/NFCU-SSL/m-p/5653849
See message 11 and 28

I have read this thread numerous times today. I see what Sareen posted and that validates what i'm saying. He deposited $3010 and now he's making $53 payments each month for 5 years, resulting in another $3010 as the total. What I still don't understand is why you would opt for a 5 year loan and then immediately pay it down to 8.9% (yes yes yes the FICO loves it) but you're not reporting 5 years of history, only that one lump sum and then the final payment.. so two months of credit history.

I'd love to do this as everyone claims it's super beneficial but I don't see how come.. For example, my rent reports monthly for an annual fee of $60. Why would I give 50x more to NFCU just to build history? It's not like NFCU is giving me any money, so I put down the $3010, and pay $3010, get my $3010 deposit back and $3010 goes to NFCU's profits.

Re: How do shared secured loans work?

Anonymous — Thu, 15 Aug 2019 03:18:17 GMT

@Jnbmom wrote:
Re read how the "SSL" works, it has been explained in detail??

It really hasn't been unfortunately.

Re: How do shared secured loans work?

Anonymous — Thu, 15 Aug 2019 03:20:38 GMT

AllZero said not to ask NFCU these questions, so what do I do if I don't understand the 'template' being provided? Am I just **bleep** out of luck for being too uneducated to participate in credit success? I want to try and learn for I can be a better person, not only for today's me, but me in 10-20 years.

Re: How do shared secured loans work?

satio — Thu, 15 Aug 2019 04:00:12 GMT

There are many threads that discuss the benefit of having an installment loan as it relates to credit mix and FICO scoring model.

There is also benefit to having a loan that is paid down to < 8.9 percent, also a boost to FICO score.

Therefore, the objective is to have a loan product that will allow a long term, that can also be paid down, and NOT shorten the term of the note by requiring the same minimum payment if a lump sum is made early in the loan cycle.

Rather, making a lump sum early in the life cycle of the loan pushes out when the next loan payment is due. In this case, by many years almost to the end of the original loan term if you immediately pay a lump sum to bring the balance of the loan to < 8.9 percent.

So with $3,001 in NFCU Savings account, you request an SSL loan for that amount (3,001 or more is the magic figure for them to agree to a 5 year term).

Day 1, you have 3,001 in your savings account. You take a loan, they LOCK the 3,001 amount as collateral for the loan. They in turn give you $3,001 in proceeds from your loan.

As you pay down this amount, those funds are no longer frozen in your share account.

If you make an immediate payment (using the 3,001 proceeds they gave you) to make a payment of 2,800 you are given the majority of that back immediately. Now (less a little interest) you have ~2,800 unfrozen in your savings account.

The interest rates that others have been given in recent months is 2.25

Even if you paid on the loan for the full 5 year terms without making a lump sum payment, NFCU is only receiving about $175 in total interest payments. Yes, it's your own money you are loaning to yourself but they are servicing the loan and making monthly reports to CRAs.

As you pay the loan down, the amount that was locked at the start of the loan is made available to you again.

You also make small payments few dollars at least each 60 days so that the payment history gets reported as an active account in good standing with all CRAs. You aren't REQUIRED to make a payment by NFCU for several years but you want the account to remain active in the eyes of the CRAs with NFCU reporting regular payments. Or keep it simple and just pay $1 each month until the required payment date is reached.

Again, the most this exercise could cost you if you never made a lump sum payment is $175. It will be much less if you immediately pay down the note by a large sum.

Hope this helps.

Re: How do shared secured loans work?

Anonymous — Thu, 15 Aug 2019 04:12:42 GMT

@satio wrote:
There are many threads that discuss the benefit of having an installment loan as it relates to credit mix and FICO scoring model.

There is also benefit to having a loan that is paid down to < 8.9 percent, also a boost to FICO score.

Therefore, the objective is to have a loan product that will allow a long term, that can also be paid down, and NOT shorten the term of the note by requiring the same minimum payment if a lump sum is made early in the loan cycle.

Rather, making a lump sum early in the life cycle of the loan pushes out when the next loan payment is due. In this case, by many years almost to the end of the original loan term if you immediately pay a lump sum to bring the balance of the loan to < 8.9 percent.

So with $3,001 in NFCU Savings account, you request an SSL loan for that amount (3,001 or more is the magic figure for them to agree to a 5 year term).

Day 1, you have 3,001 in your savings account. You take a loan, they LOCK the 3,001 amount as collateral for the loan. They in turn give you $3,001 in proceeds from your loan.

As you pay down this amount, those funds are no longer frozen in your share account.

If you make an immediate payment (using the 3,001 proceeds they gave you) to make a payment of 2,800 you are given the majority of that back immediately. Now (less a little interest) you have ~2,800 unfrozen in your savings account.

The interest rates that others have been given in recent months is 2.25

Even if you paid on the loan for the full 5 year terms without making a lump sum payment, NFCU is only receiving about $175 in total interest payments. Yes, it's your own money you are loaning to yourself but they are servicing the loan and making monthly reports to CRAs.

As you pay the loan down, the amount that was locked at the start of the loan is made available to you again.

You also make small payments few dollars at least each 60 days so that the payment history gets reported as an active account in good standing with all CRAs. You aren't REQUIRED to make a payment by NFCU for several years but you want the account to remain active in the eyes of the CRAs with NFCU reporting regular payments. Or keep it simple and just pay $1 each month until the required payment date is reached.

Again, the most this exercise could cost you if you never made a lump sum payment is $175. It will be much less if you immediately pay down the note by a large sum.

Hope this helps.

Thanks... That's what I wasn't understanding.. Why would I have to put up $3k and then pay $3k- it just didn't make sense. Now knowing that after they set it up, they will also give me $3k which I can pay down to 8.9% and then make monthly $1 payments until the final one 4 years, 11 months later to completely pay it off.. In 5 years, do I get my original $3k back?

Re: How do shared secured loans work?

Anonymous — Thu, 15 Aug 2019 07:39:43 GMT

The answer to your question is really in the name of the Loan "Share Secured Loan." You buy shares in the credit union, then those same shares are used as collateral for a loan in the same amount as the shares you purchased. In other words, your loan is secured by the shares you purchased just like a car loan is secured by the car, or a mortgage is secured by the real estate you purchased.

As you pay back the loan, the credit union releases an equal portion of your collateral back to you. If you default on the loan the credit union will deduct the amount owed from your shares.

In other words it works just like Self Lender except that it runs for a much longer term.