Having a poor credit score or no credit history can make it difficult for you to qualify for credit cards, auto loans, and personal loans from financial institutions. One way to build your credit is through Navy Federal secured credit card and loan options.

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

If you’re a Navy Federal member, this can be a good way to get access to cash as well as improve your credit score by demonstrating timely repayment behavior.

Navy Federal pledge loans are a type of secured loan. Essentially, you're borrowing against your own money.

You can use the principal value of your fixed-term certificate(s) of deposit (aka, your CDs) as collateral to get a low-interest rate Navy Federal personal loan.  As long as the term length of your personal loan does not exceed the term length of your CD, you can use your CD as security on your personal 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. And the best part?  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.

You must be a member to qualify for a Navy Federal pledge loan. Membership is only available to military service members, veterans, Department of Defense personnel, and their immediate family members.

We’ve also listed additional eligibility requirements below:

  • You must be the owner or joint owner on the CD’s certificate.
  • You must be at least 18 years old.
  • You can only pledge short-term certificates of deposit with maturities of 3-24 months for short-term loans; or
  • You can only pledge long-term certificates of deposit with maturities of 3-7 years for longer-term loans.
  • You can only pledge certificates of deposit having principal values in increments of $1,000, $10,000, $20,000, $50,000, and $100,000.
  • You can’t pledge CD’s owned inside of Education Savings accounts, IRAs, Roth IRAs, custodial accounts for minors, Custom Club accounts, EasyStart certificates, or three-year variable rate certificates.

If you’re the owner or a joint owner of a CD, you can apply for the Navy Federal pledge loan. You can also pledge the funds in your own certificate of deposit to co-sign a loan for a family member or friend who’s also a Navy Federal member by providing written consent.

Minimum and Maximum Amounts

The amount you can borrow through the pledge loan will depend on the value of your certificate. Because any bank or credit union CD that is insured by the FDIC or NCUA, respectively, is considered a highly-liquid investment that’s basically equivalent to cash, you can borrow 100% of the principal balance of your certificate. 

That being said, your loan amount cannot exceed the certificate’s value at any time during the term of the loan. Also, you can have a maximum of only one loan secured, per certificate.  This means that you cannot use the same CD to secure multiple loans, even though the principal value of the CD may be significantly higher than the total balance of the loans.  It must be only one CD that secures each loan, individually.

Credit Score and Interest Rates

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

The interest rate for Navy Federal pledge loans is the certificate’s APY rate, plus 2.00%.  So, for example, if the CD’s fixed rate (expressed as APY) is 5.00%, then the fixed rate on the loan will be 7.00%, for the entire term of the loan.

Repayment Terms

Navy Federal’s pledge loans have a maximum repayment term of 60 months. And, since your loan term cannot exceed the certificate’s term to maturity, you must own a CD that is set to mature only after your loan is scheduled to be fully paid off. If you choose to make extra payments on your loan along the way, there’s no prepayment penalty when you pay off your loan early. If you have funds available, you can pay off the loan earlier and receive full access to your certificate again.

Navy Federal Credit Union members can get a number of 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 only apply for a Navy Federal pledge loan in person at a local branch or by calling 1-800-842-6328. There’s no online application option available for these kinds of loans.

Follow these steps to apply for the loan:

  1. Check your certificate details to ensure you can borrow against it. Not all types of certificates can be pledged.
  2. Call the number we’ve provided above or visit your nearest branch to apply for the loan.
  3. Fill out the application and provide the documents requested, such as your NFCU Access Number, proof of residence, identification proof, and Social Security number or Individual Tax ID number (your ITIN).
  4. Submit the application.
  5. You’ll receive the loan funds within one business day, and once approved, the funds will be deposited into your checking account or savings account at your nearest branch or sent to you as a paper check that will be mailed to your home address.
  6. Once you receive the loan, you can pay installments through direct deposit, online, at a branch or ATM.
  7. You can also choose to use the dividends you earn on your certificate towards your loan repayment.

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 simply 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.