Table of Contents:

Credit Builder Loans

What is a credit builder loan?

How do credit builder loans work?

Credit builder loans for bad credit

Credit builder loans near me

Online lenders

Advantages of credit builder loans

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Credit Builder Loans 

Establishing good credit is not as simple as taking a walk in the park. Many lenders require a good credit history to allow you to open an account. It could be difficult for credit newbies to get basic forms of credit. However, there is a silver lining on the issue.

A credit builder loan could be a good option because it doesn’t need a credit history. It could be a good fit if you don’t qualify for a credit card or if you don’t have a friend or family who will allow you to be an authorized user on their account. Everyone begins life without credit. You could need an apartment lease, a car loan, or a mortgage. Presenting your landlord or bank with a good credit history shows that you've been financially responsible in your past. What is a credit builder loan? How does it work? What are its benefits? Let us get into the nitty-gritty of credit builder loans.

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What is a credit builder loan?

A credit builder loan is different from the traditional loan, such as Payday Loans that most people are used to. In traditional loans, upon approval of your loan, the lender sends money to your account. Afterward, you are given a grace period, and then you begin making monthly payments until your loan is fully paid off. On the other hand, a credit builder loan is like a reverse loan. Upon approval of your credit builder loan, you make monthly payments similar to a traditional loan. The lender diverts your payments to a third-party bank, which holds the funds for you. When you finish paying the loan, the third-party bank releases the funds through your lender.

It simply means that a credit builder loan is like a savings account. You will be required to make payments into the account over the course of a year or even more. At the end of the duration, you get to receive all the money you paid to the lender. Furthermore, your credit report will show that you have been making timely payments for a year! Credit builder loans are a simple way of developing a positive credit history. You only need a one-time fee for opening your account and 12 timely payments each month to build your credit score.

How do credit builder loans work?

As mentioned earlier, credit builder loans are not typical loans. You will not receive the money upfront. Your lender deposits your monthly payments into a saving account that the loanee can't access until the loan is fully paid. The loan amounts usually range between $300 loan and $1000 loan.

Unlike traditional loans, you get money after paying your credit builder loan instead of receiving money and then repaying it. It is a great opportunity to help you establish a good credit score. Your ability to make timely payments are reported to three credit bureaus: TransUnion, Equifax, and Experian.

Find out how traditional Payday Loans work. Or compare the best Payday Loan direct lenders to get an instant cash advance online:

LendYou will help you get the cash you need when you need it. You can apply for Payday Loans, Installment Loans or Personal Loans, etc. Compare the lenders and get matched with the best one.

  • MIN Loan Amount: $100
  • MAX Loan Amount: $35000
  • Terms: Varied
  • Rates and fees: Starting at 4.99% APR
  • Turnaround Time: 1 business day
  • $100 - $1000 Payday Loans
  • $1000 - $5000 Installment Loans
  • $5000 - $35000 Personal Loans
  • 18 years of age or older
  • U.S. citizenship
  • Valid checking or savings account with direct deposit
  • Minimum regular income of $1,000 per month
  • Not be a regular or reserve member of the Air Force, Army, Coast Guard, Marine Corps or Navy (or be a dependent of someone who is,) serving on active duty under a call or order that does not specify a period of 30 days or fewer.
Pros
  • High up to $15,000 loan amounts. 
  • Minimal restrictions on how you can use your loan.
  • No collateral or guarantor.
  • Bad credit is OK. 
Cons
  • It's not a direct lender, so you'll need to clarify rates and terms with the company you are matched with. 

 

Check Into Cash offers Payday Loans, Title Loans, Personal Installment Loans and other money products at affordable rates with convenient repayment. 

  • MIN Loan Amount: $50
  • MAX Loan Amount: $3000
  • Terms: Vary by state.
  • Rates and fees: 261% to 782% APR
  • Turnaround Time: 1 business day
  • Payday Loans
  • Online Payday Loans
  • Title Loans
  • Installment Loans
  • Online Installment Loans
  • Line of Credit
  • Flex Loans
  • Other Services
  • Check Cashing
  • Bill Pay
  • Western Union 
  • U.S. Money Card
  • Cell Phone Top-Ups
  • Sell Us Your Gift Cards For Cash
  • Active checking account open for 90+ days
  • US citizen or permanent resident
  • Personal and work phone number
  • Valid email address
  • 21+ years old (19+ in Alabama)
  • Social Security number (for Indiana residents only)
Pros
  • You can get even as low as $50.
  • Quick funding on the next business day.
  • Money can be used for any personal needs.
Cons
  • Not available in every state.
  • APR can be more than 153.73% depending on your state.
  • High late payment fees.

 

Greenlight Cash created an online platform to connect consumers like you with reliable lenders across the country. They partner with a large network of professionals so you get a chance to work with one of them and meet the challenge of improving your financial situation in the most effective way. Once you tap submit, you get one step closer to receiving the funds.

  • Payday Loans
  • Installment Loans
  • Personal Loans
  • be a legal U.S. resident
  • be at least 18 years old
  • have a stable source of income
  • be currently employed
  • have an active bank account
Pros
  • Unrivaled flexibility and accessibility.
  • Predictable monthly payments

  • Quick and simplified borrowing process

  • Any credit is welcome
Cons
  • Not a direct lender.

 

GoGoPaydayLoans offers Payday Loans at affordable rates with convenient repayment terms. 

  • MIN Loan Amount: $100
  • MAX Loan Amount: $1000
  • Terms: Vary by state.
  • Rates and fees: 261% to 782% APR
  • Turnaround Time: 1 business day

$100 - $1000 Payday Loans

  • Active checking account open for 90+ days
  • US citizen or permanent resident
  • Personal and work phone number
  • Valid email address
  • 21+ years old (19+ in Alabama)
  • Social Security number (for Indiana residents only)
Pros
  • You can get even as low as $100.
  • Quick funding on the next business day.
  • Money can be used for any personal needs.
Cons
  • Not available in every state.
  • APR can be more than 153.73% depending on your state.
  • High late payment fees.

 

Loan By Phone offers Payday Loans, Installment Loans and Line of Credit.

  • MIN Loan Amount: $100
  • MAX Loan Amount: $3000
  • Terms: Varied
  • Rates and fees: Vary by state
  • Turnaround Time: 1 business day
  • Payday Loans
  • Installment Loans
  • Line of Credit
  • 21 years of age
  • Social Security Number
  • Proof of Income (from your job, pension, welfare, or other source)
  • Valid email address
  • Active checking account (open for at least 90 days)
  • Current cell/home and work phone number
Pros
  • All loan applications and requests are guaranteed confidential and all transactions are governed in accordance with the laws of your state of residence.
  • Flexible repayment.
  • Available in most states.
Сons
  • High interest rates.
  • If you don't pay back on time your data may be sold to third parties.

 

Indyloan.com offers Personal Loans online at affordable rates with convenient repayment. 

  • MIN Loan Amount: $100
  • MAX Loan Amount: $5000
  • Terms: Vary by state
  • Rates and fees: Varied
  • Turnaround Time: 1 - 2 business day

Personal Loans

  • Active checking account open for 90+ days
  • US citizen or permanent resident
  • Personal and work phone number
  • Valid email address
Pros
  • Quick - no driving, waiting, faxing, paperwork.
  • High approval rate even for bad credit borrowers.
  • Online Payday cash advance with no collateral or co-signer.
  • 24 / 7 online service.
Cons
  • High interest rates.
  • Available not in all the states.
  • Only loans up to $5000 are available.

 

Credit builder loans for bad credit

All credit building lenders report your payments to the three major credit bureaus in the country, Transunion, Equifax, and Experian. It means that every moment you make a timely payment helps build a good credit score. Notably, payment history accounts for more than a third or 35% of the credit score calculation. If you don't have a credit history, credit builder loans are a great way to show the lender that you have experience with credit.

You could be thinking about your bad credit. Credit builder loans will help you a new positive history that could help overcome some of the negative histories you had, like missed payments. With every payment you make on your credit builder loan, the impact of bad credit fades with time. Your new positive repayment plan will outweigh your previous mistakes.

A credit builder loan can aid in improving the types and number of accounts you have. Although they are minor factors used when calculating your credit score, they could give you a boost. When you have a mix of credit cards and loans, it shows that you can manage various accounts simultaneously.

Credit builder loans near me

Lending circles

It is a method used among friends or families where a credit-building plan is provided by a Lending Circles Program, which is managed by the Mission Asset Fund. You will get interest-free social loans whose payments are reported to the three major credit bureaus. Notably, the services aren't available everywhere. However, you can fill in your zip code and find out if there is one in your local community. Such groups usually contain ten participants who agree to put in a particular amount of money each month, and the total amount collected goes to one person. Similar to a round-robin fashion, the members contribute each month until all participants receive their money.

Community banks or credit unions

Identifying and finding a credit-builder loan could be challenging. One of the simplest ways to search online for a "credit builder loan" plus your state. Credit unions usually have membership requirements, such as making charitable donations, worshipping in a particular church, working in a certain company, or living in a particular county. You could get a credit-builder loan in your nearby credit union or community bank. They have some of the lowest interest rates.

Online lenders

There are many online credit-builder accounts. They provide a similar payment plant to credit unions or community banks. You will make monthly payments towards your savings account. One of the online lenders is Self.

Community Development Finance Institutions (CDFIs)

If you are unable to get a credit-builder loan from a community bank or credit union, you could try a CDFI, which is an organization developed to help lower-income earning communities. There are approximately 1000 CDFIs in the US. There are CDFIs in every state. You can search for the CDFI in your state.

Advantages of credit builder loans 

  • You get credit build loans with no credit check. The companies will base your worthiness on other issues not necessarily associated with your credit history.
  • Qualifying for a credit-builder loan is faster and easier than getting a personal loan, an auto loan, or a new credit card.
  • With each timely payment you make on your loan, you build a positive repayment history, which will be used to improve your credit score.
  • Credit-builder loans help you achieve what they say. Their primary goal is helping you build a positive credit history even if you have a nonexistent or bad credit history.
  • Your credit-builder loans are reported to the three main credit bureaus, Transunion, Equifax, and Experian. The loan is reported as a debt owed, and it begins your positive credit history.

The Bottom Line

Credit-builder loans are a great option for you to build your nonexistent or bad credit score. It shows lenders that you can pay your loans efficiently and responsibly. It could open up greater opportunities for you in the future. However, before getting your credit-builder loan, get to learn the specifics. How much will I pay monthly? What are the interest rates? Do I need collateral? Is there any flexibility? Also, it would be best if you learned whether they report the loan repayments to the three credit bureaus. Credit-builder loans could improve your credit score while improving your savings momentum. All in all, it could assist you in reaching the next financial level.