|By David Pilley on July 7, 2011
There are some things not meant to be tied up in a line of credit. A savings account is one of those things. It’s meant for one purpose: saving! To use a savings account properly, you should deposit a portion of every check you make in order to have something for the future. It’s a resource that should be tapped only in an emergency, and it should be growing over time. A savings account accrues interest each month, and the more you have in the account, the more interest you will receive. It can be a valuable source of protection, so why put it in jeopardy with a payday loan?
That’s right, there are savings account payday loans. To get this type of loan, you can use your savings account as leverage. A savings account payday loan will also have the basic requirements of a regular payday loan, such as being at least 18 years old and making a certain minimum monthly income (usually set at $1,000). This type of payday loan tries to sell you on the idea that, even if you don’t have a great credit score or a lot of funds in your checking account, you can still get a loan if you have a sizable amount of money in your savings account. You should be aware that a savings account payday loan will have the same high interest rate as a typical payday loan if you don’t pay it back on time.
It sounds enticing, but a savings account payday loan might just be the cause of more financial problems. This type of loan is advertised as a benefit to borrowers who have a savings account but not a checking account. The question I would ask is why do you not have a checking account? The primary reason for a checking account is to hold expendable funds (i.e. the money you use to maintain your everyday life purchasing food, clothes, gas, etc.). If you don’t have a checking account, then are you putting all of your money into a savings account? If so, you could actually be losing money. With many savings accounts, you could be paying a fee every time you withdraw funds. I would suggest opening up a checking account for money to use, and use the savings account for its said purpose.
I mentioned that a savings account can accrue interest. This can’t happen if there’s nothing in there. As soon as you take something out of your savings, you lose future interest. You should not be putting your future in jeopardy with a payday loan. The main factors into getting approved for a loan should be the amount of usable money you currently have and your history of paying back loans, not the amount of money you currently have saved up for the future.