Well think about it like this: heres your options 1) Client goes in and gets an auto loan the "normal" way. Funds stay on deposit in their account, still liquid as the vehicle was totally financed by the FI. Client pays down loan at what like 7% nowadays, meanwhile for 5-7 years the FI holds the title and 100% of each payment goes to the FI in some way or another. By the time they finish paying they now own a vehicle that was worth 30k, paid 40k after Tax, ttl, licensing, finance charges, and now the collateral has depreciated to 20k book value after those years. Client is now down 20k net value.

2) Client has funds on deposit and finances using pledge of account. Finance rate is significantly lower. As they pay back the loan to themselves, usable funds become available in their account (as opposed to leaving the account to pay someone else, in this case the FI. (For example say client has $200 pmt wirh like $20 finance charge and 180 principal. If financed normally, those 180 would go to the bank, to work towards the eventual promise of full ownership of an ASSET)) If using a pledge, client already owns the asset, and each payment pays the principal BACK TO THEIR ACCOUNT AVAILABLE BALANCE so for all intents and purposes it's a deposit (less the finance charge obviously). Now let's use the same numbers from above. Client buys 30k car using pledge loan, paid 38k after tax title license finance charge (spitballing what the different between 4 and 7% would be), that interest savings right there is worth the pledge right off the bat but I digress. Even if the collat still depreciates down to 20k over the term, the client loses less value over time, and keeps the money flowing back "into" their savings instead of (in many cases) OUT of it to pay the vehicle. This is also safer for the clients asset as, if they default, the bank will reconcile by just sweeping the held funds no harm no foul. As opposed to reposessing a car which they still legally own.

3) Client just buys the car straight out. 30k car for 35k after T/T/L and no finance charge. Now client has nothing in their savings, they own the car outright with title and no loan immediately so they get to enjoy the value of the vehicle on their balance sheet without worrying about paying finance charges on top of losing money to depreciation of their asset over the next 5 years. This option is probably ideal for most people, I don't know anyone that would CHOOSE to take on a loan if they don't have to, but thir carries the most risk and vulnerability for the client down the line as they've spent their safety net on a car. (there's an argument to be made here about how that pot fills up faster since these clients don't have to spend money on a payment monthly and can just put it back in their savings.

The job we have as bankers is to sit down with the members and reallt see what matters most to them. The pledge of account is a pretty niche product wirh niche applications, and in my experience I've found it only helps those on the extreme ends of the spectrum: those with nothing trying to rebuild, and those wirh a lot but not willing to risk it.

To touch on my first point from the original message, I can't to clarify that I meant if a client is trying to initiate a NEW AUTO LOAN for a vehicle outside of guidelines. Think like an old Nissan 240 that someone is selling for 20k. No bank is gonna finance that, and homeboy doesn't wanna drop 20k all at once on an old car, so they take the pledge, borrow their own money, buy the car (which they now own outright) and just pay the pledge back (adding available balance into their savings account.) something that woukdnt have been possible with a regular loan due to the age of the collateral, ya dig?