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Recovering from poor credit – or establishing credit if you are a young adult or a recent immigrant – can be a long, slow and costly process.
Your credit history reflects your ability to borrow and repay money responsibly over time, and if you have a low credit score, you don’t get many opportunities to demonstrate your ability to manage a credit card or loan. Your applications will often get declined and you’ll likely face sky-high fees and interest rates on any financing that you can get approved for. Plus, just applying for multiple loans or credit cards can actually drop your credit score even more!
There is one proven tool to help you establish or boost your score in a fairly short period of time – credit builder loans.
These small loans are specifically designed to help you show a history of responsibly making on-time loan payments, which are reported to the three major credit bureaus. Plus, they can help you build savings while you improve your credit score, a win-win!
Credit builder loans were originally offered by a handful of credit unions across the United States, so they weren’t available online nor offered in every state. But now, a company named Self Lender offers affordable credit builder plans nationwide, with a simple online application process.
Is a Self Credit Builder Account a good choice for you? Let’s take a look.
What is the Self Financial Credit Builder Account?
Self Financial is one of the largest providers of credit builder products, with over 1 million customers nationwide. You can apply for an account1 through Self online or via the app. It only takes about five minutes, there is no hard credit pull (which can further ding your credit score), and a low credit score or no credit history are no problem.
Self customers see their credit score increase by an average of 32 points2 and people with very low credit scores often achieve the biggest improvements! (Many factors go into your credit score, so individual results may vary.)
If you don’t have a credit history, Self is a great tool to establish one in just six months with all three major credit bureaus, potentially in the fair-to-good range. This could help you unlock access to a credit card, auto loan or personal loan at reasonable rates.
Boost your credit score and build your savings >>> Check out Self
How do Self Credit Builder Accounts work?
Self’s Credit Builder Account work in the reverse order of a traditional personal loan or installment loan. Instead of getting your proceeds at the start of the term and then paying down your balance with regular monthly payments, with a Credit Builder Account you’ll receive your money back after making all of your payments, minus a reasonable interest rate and administrative fee. Several Self plans cost less than $100!
That’s right, you get most of the money you paid towards your Self plan returned to you after your final payment, so you’re building up some savings while you work on improving your credit score! And if you ever find yourself unable to keep up with the payments or just aren’t satisfied, you can cancel your Self plan at any time and get your accumulated savings returned to you, minus interest and fees.
When you setup your Self account, you’ll select the monthly payment amount and plan length that works best for you, with options between $25 – $150 for 12 – 24 months. As you make your on-time monthly payments, Self reports them to the three major credit bureaus (Equifax, Experian and Transunion).
Here are the four credit builder plans you can choose from:
|Self Plans:||$25/month for 24 months||$35/month for 24 months||$48/month for 12 months||$150/month for 12 months|
|You’ll Get Back||$520||$724||$539||$1,663|
For example, if you choose the Self Credit Builder Account with a $48 monthly payment for 12 months, you’ll make $576 in total payments and receive back $539 upon completion of your plan. Self’s interest cost and $9 upfront admin fee will total $46, which is a 15.65% APR – that’s less than half the APR charged on most personal loans for borrowers with fair credit.
You can also qualify for a Self Visa credit card in as little as three months, with a credit line that can grow to up to $3,000!
Pick your own affordable Credit Builder Account >>> Check out Self
Credit Builder Alternatives to Self
While Self offers a great product, it’s not necessarily right for everyone. While building up savings you can tap later is great, Self doesn’t provide you with any access to cash now. And even though Self’s plans start at $25/month, that still may be more than you’re able to pay if you’re on a very tight budget.
Fortunately, there are several other quality credit builder loans that may be a better fit for your needs. They are all affordable options to help you boost your credit and build up some savings as well, with easy online enrollment. Here are three to consider:
SeedFi Borrow & Grow – Get Cash Now and Savings for Later
SeedFi’s Borrow & Grow Plan3 is a personal loan and a credit builder loan wrapped together in a single product. You get access to some cash right away – up to $5,000 – while also building up savings that are handed back to you at the end of your payment plan. And just like with Self, your on-time payments can help boost your credit your score – many SeedFi borrowers saw their credit score increase by 45 points within six months4!
Take a look at a sample loan that you could qualify for with SeedFi. You would receive $3,500 at the start of the plan, which is yours to use now. Every two weeks you would make a $130 payment for 37 months. Upon completion of your payment plan, you would also receive back $3,500 in savings that you’ve accumulated.
This plan results in total payments of $10,305, including a $3,305 in finance charges. The cost of the plan works out to a 26.99% APR, which is well below the 36% APR rate that many lenders charge on personal loans to borrowers with fair to poor credit.
SeedFi’s Borrow & Grow Plan loans range from $1,500 to $9,000 for first time borrowers, with $300 to $5,000 accessible immediately and then the rest of the loan locked in a savings account until you have repaid in full. Repayment periods range from 10 months to 48 months, and APRs range from 11.59% to 29.99%.5
Access up to $5,000 for less >>> Check out the SeedFi Borrow & Grow Plan
Credit Strong – Build Your Credit for Just $15/Month
While improving or establishing your credit score can open the door to traditional, lower cost credit cards and loans, sometimes it can be tough to free up the extra cash required to make regular payments. If you want to work on boosting your credit score but don’t have much cash to spare, Credit Strong may be the right credit builder option for you.
Credit Strong offers five different credit builder loans, including one that costs just $15 per month. The Build 1000 plan is a $1,000 credit builder loan with repayment stretched over ten years to keep your monthly payment amount at just $15 (plus a one-time, non-refundable administrative fee of $15). Rates on the Build 1000 plan are an attractive 13.5% APR, which is lower than Self’s rates by more than two percentage points.
During the Build 1000 plan, you would make 120 monthly payments of $15 (plus the $15 administrative fee), which totals $1,815. You will receive back $1,000 at the end of the play, so the total finance charge is $815.
Now, ten years is likely longer than you’ll want to (or often need to) stick with a credit builder loan and the good news is that you can cancel your Credit Strong account with no prepayment fee or early termination fee and receive your accumulated savings.
You should note that Credit Strong’s credit builders are amortizing loans (like a mortgage or car loan) which means that much of your payments in the early years go towards interest, while towards the end of the loan most of your payment goes towards reducing the loan balance. For example, if you cancel your Build 1000 plan after two years, you’ll have made 24 monthly payments of $15, totaling $360 (plus the $15 admin fee). $249 of those payments would go to interest and you’ll have access to $111 in savings.
On average, Credit Strong customers see their credit scores increase by more than 25 points within 3 months of opening their account. Credit Strong account holders who complete 12 on-time monthly payments more than double that score increase to almost 70 points. If you don’t have a credit score, it will take about 1 to 2 months from the date your account is reported to the bureaus to get a VantageScore® and about 6 months to get a FICO® Score.
Pay just $15 per month to boost your credit >>> Get started with Credit Strong
MoneyLion Credit Builder Plus – Access Some of Your Loan Now, Plus 0% APR Cash Advances
MoneyLion is becoming a Swiss army knife of personal finances apps, and its Credit Builder Plus offers loans for up to $1,000 where you’ll get a portion in cash now, and the rest upon completion of your plan.
Rates range from 5.99% to 29.99%. You’ll also need to pay a hefty $19.99 monthly fee to participate in Credit Builder Plus, though this does cover a few additional small benefits, such as higher limits on 0% cash advances (more on that in a moment).
More than half of MoneyLion Credit Builder Plus customers see their credit score increase by over 42 points within 60 days of opening an account.
Another benefit of Credit Builder Plus is that you can get access to up $300 in MoneyLion cash advances with no interest or fees – 0% APR. You’ll need to link a checking account to MoneyLion and receive a paycheck or government benefits payments on a regular basis to qualify. MoneyLion will put the cash advance into your account in as fast as 12 hours at no charge, or you can pay an optional small fee to get the funds in minutes. Similar to apps like Earnin, MoneyLion will ask you to leave a tip, but this is completely optional and won’t impact your cash advance limit (so we recommend that you skip it). MoneyLion will schedule automatic repayment of your cash advance to coincide with your next paycheck.
Get funds while you save and build credit >>> Check out MoneyLion Credit Builder Plus
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- All Credit Builder Accounts made by Lead Bank, Member FDIC, Equal Housing Lender, Sunrise Banks, N.A. Member FDIC, Equal Housing Lender or SouthState Bank, N.A. Member FDIC, Equal Housing Lender. Subject to ID Verification. Individual borrowers must be a U.S. citizen or permanent resident and at least 18 years old. Valid bank account and Social Security Number are required. All loans are subject to consumer report review and approval. All Certificates of Deposit (CD) are deposited in Lead Bank, Member FDIC, Sunrise Banks, N.A., Member FDIC or SouthState Bank, N.A., Member FDIC.
- Individual results may vary. Average credit score change using VantageScore 3.0 based on a sample of 40,403 Self customers who started their accounts in 2017 or 2018 and completed the full term of their Credit Builder Accounts in 2019. Sample excludes customers who started with no credit history. Results show that customers with a starting credit score of 600 or below were more likely to see positive score change results.
- Personal loans and banking services provided by SeedFi’s bank partner, Cross River Bank, Member FDIC.
- Customers with fewer than three tradelines on their credit profile experienced an average increase to their VantageScore 3.0 credit score from 579 to 624 (+45 points) after six months of consecutive on-time payments (data gathered from Dec ‘19 through Nov ‘20).
- Advertised rates and terms will be subject to change without notice. Your actual APR and other loan terms will be shown to you as part of the online application process.