Credit builder loans are an affordable way to build your credit, regardless if you have little to no credit history. We’ll be answering all your questions about these loans, including:
- How do credit builder loans work?
- Where to apply for credit builder loans?
- Finding credit builder loans near you.
- And other options for building credit.
How Do Credit Builder Loans Work?
With credit builder loans, you get back whatever you pay into them.
Credit builder loans work a little differently than most other loans. First, a lender makes a small installment loan to be held in a certificate of deposit (“CD”) account. This F.D.I.C. insured and is held in your name.
In most cases, you pay an administrative fee and, month over month, pay down the amount lent to you stored in the CD account. Month over month, your payment history is reported to the major credit bureaus.
Over time, credit builder loans can strengthen your credit history and build your score. But remember, the companies giving out credit builder loans aren’t your friends.
Over 190,000 people are rebuilding their credit using Self Lender credit builder loans. Pay just $9 to open your account with payments as low as $25 per month.
Yes, they’re helping you build or rebuild your credit and improving your credit history, but at a cost. And that cost can be as high as 16%, so be wary. We recommend Self Lender because they’re fair, affordable, and have no credit score requirements.
Apply For Credit Builder Loans
If, once you’re approved, you won’t be able to access the money until the loan term ends. Why is this? Because the lender is taking on all the risk by approving you for the loan in the first place. By holding onto the money, it’s an incentive for you to pay.
Missing payments can damage your score, especially if they’re late by 30 days or more If you make your payments on time, you’ll be in really good shape after the 12 to 24 months loan term. That’s because you’ll have the amount you paid into it, plus a much more positive credit score and credit history. Nice!
Credit Builder Loans Near Me?
Credit unions should be your first stop when seeking a credit builder loan. In fact, they should be one of your first stops, period. Because credit unions are focused on the quality of products and operating costs versus profits, they’re able to offer lower fees and better rates.
Credit unions are nonprofits, while banks are for-profit. So if you’re searching for the best credit builder loans, start there. Just keep in mind that credit unions often have membership fees and rules, such as living local and paying $10 to join.
Each is different, so contact yours. And definitely make the credit union your first stop. Self Lender simplifies the seemingly impossible process of building or rebuilding credit. There are other options you can turn to when you need to rebuild credit. We’ll be reviewing those in a moment. But keep them in mind.
Other Options For Building Credit
Another option you can look into to rebuild your credit would be via a secured loan at your credit union or bank.
Using a deposit you’ve already made as collateral, the deposit amount would be likely be frozen until the loan is paid back. If rebuilding your credit is a high priority, we recommend you call or visit your local credit union or bank. Ask if you can borrow against yourself, using your deposit amount as collateral, to reestablish your credit.
Like credit builder loans, secured credit cards are also effective at rebuilding your credit. But the downside is that you’ll have to put some cash down as a deposit or, with a secured loan, have that cash frozen up. How much is the cash deposit for a secured credit card? The amount varies, but generally, it’s equal to the card’s credit limit.
Another option, depending upon your credit history, would be an unsecured personal loan. The downside here is that if your credit isn’t in good shape, you’ll pay higher interest. These rates can be as high as 30% or more, and rates like that translate to a much higher cost.
1 in 4 families turn to fringe financial services for their daily needs. There are unscrupulous lenders out there who will be happy to give you an unsecured personal loan. All without checking your credit either. But be wary, as these so-called “loans” are often payday loans. Payday lenders charge a staggering 391% to 521% interest on their loans. This according to the Mission Asset Fund.