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What Are Credit Builder Loans?
Self Lender is a company that provides credit builder loans. A credit builder loan is a type of installment loan, which means you pay the same amount every month, like with a car loan. Credit cards are a type of “revolving loan,” which is different because the amount of the loan fluctuates with how much you spend and pay back each month.
Credit builder loans are one of the safest and easiest ways to build credit history. If you have bad credit or no credit at all, this kind of loan might be for you, especially as an alternative to a secured credit card.
A credit builder loan is a very different type of installment loan, only intended to help you improve your credit scores. You won’t get money up front to spend as you wish. Instead, you’ll have to pay back the entire loan first, and then your funds will be available to you.
As you pay back the loan, that positive activity will be reported to the three major credit bureaus: Experian, Equifax, and TransUnion. This payment history will show up on your credit reports. That doesn’t mean that your credit will simply go from awful to excellent with this one loan, but it will improve your scores (all other things being equal).
Self Lender only began in March 2016, but they already have over 6,300 members saving over $1.7 million in credit builder accounts. They claim that most people who use their credit builder loan go from a 0 to 650 FICO Score in 6 to 9 months, or see a 60+ point improvement in their score.
If you decide Self Lender isn’t the right fit, you could also check with a local credit union or bank to see if they can offer you a credit builder loan.
How Does Self Lender Work?
Self Lender is designed for people who are new to credit, or have bad credit and are looking to improve it. They report activity to all three credit bureaus. Their savings plans start at $25/month, and you can get a 12-month or 24-month CD.
If you want to take out a credit builder loan through Self Lender, here’s how the process works:
- Sign up for a free Self Lender account to monitor your credit and see the options they have available to you.
- Choose a loan amount.
- Pay one-time fee of $9–$15, depending on the product.
- The amount of the loan is placed in an FDIC-insured, interest-bearing CD account (similar to a savings account).
- Make a payment every month to Self Lender.
- After 12 months, you’ll receive the full amount of the loan, plus interest, and your credit scores will have improved, as long as you paid on time and haven’t been irresponsible with other accounts.
For example: A $545.00 credit builder account, paid 12 times over one year would have a monthly payment of $48.00, and an Annual Percentage Rate of 10.69%.
And that’s all there is to it. Just be sure to make every monthly payment on time, and you can set up autopay for that. Like with any account, a late payment can hold back your credit scores for years.
Getting the Most out of Self Lender
Be sure to read through the terms, and contact their customer service if you have any questions.
Here are some other things to know about Self Lender to help you get the most out of their credit builder loan:
- You’ll need a bank account or debit card, valid email address, residential address, phone number, social security number (SSN), and to be at least 18 years of age.
- Self Lender does not do a hard credit inquiry when you apply.
- You can pay off your Self Lender loan early for no penalty, saving you money on interest.
- If a loan payment is 15 or more days late, a fee will be charged of 5% of that payment. If a payment is 30 or more days late, this will be reported to the credit reporting agencies. Contact Self Lender if you’re having trouble making your payments on time.
- You can refer a friend to get $10, paid by check
- You can only have 1 loan at a time through Self Lender.
Are you ready to start building or improving your credit? Click here to check out Self Lender, sign up for their free credit monitoring service, and begin making a positive impact on your credit report.
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