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Having a poor credit score or no credit history can make it tough to qualify for credit cards, auto loans, and personal loans from financial institutions. A great way to build or improve your credit is by using Navy Federal secured credit card and loan options.

Navy Federal pledge loans allow members to borrow money using their deposit accounts as collateral, minimizing risk for both the credit union and the borrower. These flexible loans can be used for personal expenses, home improvements, debt consolidation, and more.

As a Navy Federal member, a pledge loan is a simple way to access cash and boost your credit score by demonstrating timely repayment behavior. Learn how you can leverage your certificate deposits to strengthen your financial future.

Navy Federal pledge loans are a type of secured loan, meaning you're borrowing against your own money. You can use the principal value of your fixed-term certificate(s) of deposit as collateral to get a low-interest rate Navy Federal personal loan. Your CD will continue to earn dividends at its current Annual Percentage Yield (APY) while you repay the loan.

If you’ve been unable to get credit cards or loans due to having no credit history or bad credit, getting a pledge loan can be a good way to rebuild your credit.

To get this kind of loan, you must be a Navy Federal Credit Union member and have one or more certificates of deposit worth more than the amount of money you would like to borrow. Your certificate(s) will continue to earn dividends at their current Annual Percentage Yield (APY), while you repay the loan.  

The payments you make towards your loan will be reported to the three major credit bureaus and will be reflected in each of your credit reports.

To apply for a Navy Federal pledge loan, you must first be a member first. Membership is available to military service members, veterans, Department of Defense personnel, and their immediate family members. You must also be the owner or joint owner of the CD certificate.

You'll also need to meet the following eligibility requirements:

  • Be at least 18 years old
  • Pledge short-term CDs with maturities of 3-24 months for short-term loans or long-term CDs (3-7 years) for longer-term loans
  • Pledge CDs with principal values in increments of $1,000, $10,000, $20,000, $50,000, and $100,000
  • Not pledge CDs held in Education Savings Accounts, IRAs, Roth IRAs, custodial accounts for minors, Custom Club accounts, EasyStart certificates, or three-year variable rate certificates

Meeting these eligibility requirements (PDF) helps ensure you’re set up for success when applying for a Navy Federal pledge loan.

As the owner or joint owner of a Certificate of Deposit (CD), you can apply for a Navy Federal pledge loan. You can also pledge the funds in your own CD to co-sign a loan for a family member or friend who’s also a Navy Federal member, provided you give written consent.

Minimum and Maximum Amounts

The amount you can borrow through a pledge loan depends on the value of your CD. Since any CD insured by the FDIC (for banks) or NCUA (for credit unions) is considered a highly liquid investment, you can borrow up to 100% of your CD's principal balance.

However, your loan amount cannot exceed the value of your CD at any point during the loan term. Additionally, you’re limited to securing only one loan per CD, meaning you can’t use the same CD to back multiple loans, even if the CD’s principal value exceeds the total loan balance. Each CD can only secure one loan at a time.

Credit Score and Interest Rates

Navy Federal doesn't list minimum credit score requirements on its website. However, since this is a secured loan, it’s accessible to those with lower credit scores or no credit history.

The interest rate for Navy Federal pledge loans is the CD’s Annual Percentage Yield (APY), plus an additional 2.00%. For example, if the CD’s APY is 5.00%, your loan's fixed interest rate will be 7.00% for the entire term.

Repayment Terms

Navy Federal pledge loans have a maximum repayment term of 60 months. Since the loan term cannot exceed the CD’s term to maturity, your CD must mature after your loan is scheduled to be paid off. If you decide to make extra payments along the way, there is no prepayment penalty. Paying off your loan early will allow you to regain full access to your CD funds.

Navy Federal Credit Union members can get numerous benefits when they borrow a pledge loan, the major benefit being the ability to improve their credit score.

Here are some of the benefits of borrowing a pledge loan:

  • It’s a good borrowing option for those who want extra cash but don’t want to lose the dividends from their certificates.
  • The lower interest rates make it a better option compared to most personal loans.
  • There’s no prepayment penalty if you pay off the loan early.
  • You’ll be able to rebuild your credit and improve your credit score through timely payments.
  • The funds can be used for any purpose.
  • Navy Federal is a reliable and trustworthy lender, as demonstrated by its high customer ratings on Trustpilot.

“With no shareholders to make a consistent profit for (or pay dividends to), the credit union has more financial freedom to engage in flexible types of lending, such as these lower-interest pledge loans,” shares Brad Reichert, a financial expert and the founder and managing director of Reichert Asset Management LLC.  

You can apply for a Navy Federal pledge loan online, by phone, or in person at a local branch. The application process is flexible, allowing you to choose the method that works best for you. To apply online, visit Navy Federal's official website.

If you prefer to speak with a representative, you can call 1-888-842-6328. For those who prefer in-person service, you can visit your nearest Navy Federal branch.

Application Steps:

  1. Review Your Certificate Details: Make sure your certificate meets the eligibility criteria for pledging, as not all certificates are eligible.
  2. Provide Necessary Information: Be prepared to provide details such as your NFCU Access Number, proof of residence, identification, and your Social Security number or Individual Tax ID number (ITIN).
  3. Submit Your Application: Complete and submit the application through your chosen method.
  4. Receive Funds: Once approved, your funds will be deposited into your Navy Federal savings or checking account, or you may receive a paper check in the mail.
  5. Manage Repayments: Repayments can be made via direct deposit, online banking, at a branch, or through an ATM. You can also apply the dividends earned on your certificate toward your loan repayment.

This streamlined process ensures you can access funds secured by your certificate in a manner that best suits your preferences.

A Navy Federal pledge loan may be the right choice if you’re already a credit union member, have a qualifying certificate, and want to rebuild your credit history. While the loan rates are quite competitive, there are restrictions in place for how much you can borrow and for how long.

If your goal is to improve your credit score, those restrictions may not matter to you as much. Keep in mind that this is a secured loan, so you may lose your collateral if you fail to repay the loan. Ensure you’re able to afford the monthly payments before you borrow the installment loan.