re: Secured LOCs: What is the point?

OP,

You are over thinking it. The use of a savings/cd secured loan has benefits. I get your line of thinking. It's tied up, I can't touch it, why not pay all cash? Is this for everyone? No. It feeds the need for a small set of people and here is why.

We can agree on building credit as a Pro for a savings/CD secured loan or loc, for someone with limited credit history.

Let's say I have 30k in a savings account and want a car for 30k. If i spend 30k on car, all cash is depleted and I have to self save again at $×××/ mo to build back to $30k.

However, I'll just get a car loan at 2%-5+%(lets assume credit isnt perfect) and keep my 30k in bank. Well here is a better option...

Place a CD secured hold on a 5 year CD paying 3% loaning you the money at 5%. Your net interest rate payback is only 2% vs 2% or higher on the scenario above. And after you payoff the loan, you still have $30k+ interest in bank and didn't have to force yourself to save it.

It certainly isn't for everyone and can work in rare cases to be a better scenario.

This is also subject to the math working out on current market interest rates. I had a CD that was actually paying more than my interest rate at one time. If you are going to do a loan anyway for something, the secured option can be better if the paying interest rate is high enough