The FI I work with offers two sorts of secured personal loans. The first one is secured against a CD you have in your account. We'll lend you the money that's in your CD at a higher % APR than your CD is earning, the term can only be equal or lesser than that of the CD term. I've seen these used very rarely to buy vehicles when the client has a huge amount of money locked up in multiple CDs and is very affluent. I still don't know that it makes sense, though, because if your CD is earning 5%, suddenly your loan has an APR of 7% and you must front each and every payment as if it were a non-secured loan (when the CD progressively "releases" the hold amount, it's still not available for use to make payments towards the loan, it's still "held" in the CD)

The second type of secured personal loan is the one my question is directed against. You deposit X amount of money into your savings account, and we cut you a check for X while placing a hold for X in the savings. You make payments of the principal interest (financing fee) divided by the loan term. Whatever principal you pay towards the loan, the equivalent amount is unblocked from the savings account. This way, by "locking up" the amount of the first payment the entirety of the loan's finance charge, you can set up an auto-pay and the loan pays itself off continuously. It's a nice little installment loan that reports for a year or two as "pays on time" that you essentially never have to worry about because it's in a constant cycle of paying itself down.

The downside is you basically end up back at square one (plus having to pay a finance fee), and I can not think of any use cases for this non-CD secured personal loan that make sense apart from credit building. If you have a bunch of money you want to take out a loan against, why not just... skip the 2% finance fee and use that money to pay for whatever you want directly? The ONLY advantage is an installment loan reported to the credit bureaus. Am I missing ANYTHING here?

Maybe the one other case could be a situation where you have to maintain a certain balance in an account for whatever reason? Like those people who self-insure and must maintain a balance of at least $60,000 in a bank account, I suppose you could still maintain a "balance" of $60,000 but abscond with a $60,000 check to use elsewhere by utilizing this sort of secured personal loan. I don't think that counts though, because the money is held in the savings and is not available