"Secured personal loans?", I hear you ask- they're also known as "pledges of account", a seemingly useless type of niche loan UNLESS you're trying to build credit, in which case they seem like a no-brainer and a perfect installment-loan compliment to a secured credit card in order to balance out a credit portfolio.

The gist of it is that you lock up some money in an account, making it untouchable, and in turn the lender cuts you a check for the same amount while also creating a personal installment loan with monthly payments. This is the reason that I feel these loans are "useless" in the traditional sense- you could just cut out the middleman and purchase whatever you wanted to with the liquid cash available in your account instead, avoiding the need to pay interest to the lender.

However, as a credit-building tool, they have some characteristics that seemingly make them very attractive:

1. Automatic approval: there is no hard-pull inquiry or even a soft-pull inquiry at my FI, only an automated verification that funds are in the account, and then the loan is created on the spot. They don't care what your income is or whether you had a bankruptcy on file, or whether you've never had credit, or whether you're in prison, or anything lol
2. Very low interest "fee" over the course of the loan: at my FI, I can get one for 12 months where the interest ends up being like $6.00
3. Set and forget: When you make a payment to the loan, the equivalent amount automatically releases from your "held" amount - meaning that with a simple autopay the loan will pay itself on-time every month until it's paid off (I can keep the rest of the funds from the check they cut minus the first payment amount and do whatever I please with them)
4. Very low minimums to participate: my FI's minimum amount is like a couple of hundred dollars only
5. Ability to have almost an unlimited amount of these set up with an ouroboros-like autopay, paying themselves off and reporting individually to the credit bureaus

I tried this "scheme" on myself with just a single "pledge of account" since I have only ever had one or two revolving accounts (credit cards) and never had an installment loan anywhere. The month after I opened one my score jumped 40-50 points from ~741 to like ~786 and I gained the "excellent" qualifier under my "balanced credit report" section.

Is everyone just sleeping on this great installment-loan counterpart to a secured CC? Should everyone who starts out with a secured CC also get a secured personal loan at the same time? Or are there some major downsides that I'm missing?