You can get approved easily for credit builder loans because you won’t get access to the borrowed money until you’ve already paid off the loan.
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Working on building your credit score is one of the most important things you can do for your finances. Lenders use your credit score to determine whether you’re a trustworthy borrower, so a bad credit score could mean you won’t be able to gain access to certain financial products.
By comparing the best credit builder loans below, you can get started on your path towards a new and improved credit score.
What Are Credit Builder Loans?
Credit builder loans are loans with an easy approval process that are designed specifically for people who need to build credit because they don’t yet have a strong credit history or because they have had problems with their credit in the past.
In most cases, when you take out a credit builder loan, you borrow between $300 and $1,000 – but the catch is that you don’t actually get access to the funds until you’ve already paid the full loan amount back.
The money you borrow is put into a savings account for you. You’ll make monthly payments based on your interest rate and amount borrowed, and the lender will report your monthly payments to the three credit bureaus – Equifax, Experian, and TransUnion. Once you’ve paid back the entire borrowed amount, you’ll be given the funds that the lender deposited into your savings account.
In other cases, you’ll be given the borrowed funds right away – but need to have the borrowed amount of money invested in a savings account that serves as a security deposit for the credit builder loan. In rare cases, you can also get a loan and access the funds right away, without putting money into an account that serves as collateral. These types of loans are usually for very small amounts, payday loan in Medina Ohio and the loan rate is often higher.
Because you pay back the loan before you gain access to the money – or because your loan is secured by cash in your savings account – there’s no risk to the lender giving you a credit builder loan. These loans encourage you to save money while building credit since you end up with a nest egg in your bank account at the end once you’ve paid back the loan amount and get access to your borrowed funds.
Take control of your credit
- Reports to all three credit bureaus
- FDIC insured
- Plans vary between one to two years
Best Credit Builder Loans
Many financial institutions offer credit builder loans, including banks, credit unions, and online lenders. These loans can have different interest rates, loan amounts, fees, and loan payment rules. It’s important to compare your options to make sure you find an affordable loan that reports to the credit reporting agencies and that charges minimal interest and few or no fees.
1) Republic Bank
Republic Bank has a C- BBB rating. They claim that their Credit Builder program may improve your credit score in as little as 12 months, but note that this is not guaranteed. The money you borrow will be placed into a certificate of deposit (CD) where it will earn interest during repayment. You can learn more about the Republic Bank credit builder loan on their website.