At some point, you have to start. If you have low, limited, or no credit history,The Best Credit Builder Loans you likely know more about your situation than most.
You might also know that using credit wisely, like getting an installment loan for people with bad credit, a low-limit secured credit card, or a line of credit made just for building your finances, is a terrific way to get out of a financial hole.
These loans are all set up to help you develop credit and improve your credit record at a low cost.
Here are the best credit-builder loans.
Using all the credit products on this list responsibly and paying your bills on time can help you build or rebuild your credit. All are widely available. That’s a big advantage over credit-building loans issued by community banks, credit unions, and some localised online lenders, and it is a key criterion for inclusion on this list.
Each of the lenders mentioned here does at least one thing really well, whether it’s offering unusual borrowing flexibility or a wide range of loan amounts and terms. Our best overall pick delivers the best value on the path to building excellent credit, in our view.
Best Overall: CreditStrong
CreditStrong is the best credit-builder loan product on the market right now. Key selling points include its unusually high borrowing limits and wide variety of loan and credit line structures for maximum flexibility.
CreditStrong’s products fall into three general categories:
- Revolv: For a $99/year subscription fee, get a revolving credit tradeline up to $1,000 that you can draw on and repay as needed.
- Install: For as little as $28 per month, save $1,000 or more in 24 to 48 months.
- CS MAX: Save as much as $25,000, repayable over longer times, with pricing based on loan size.
Additional features:
- No credit score required
- No credit check during underwriting
- You may cancel at any time and receive your principal back, minus interest and fees, without affecting your credit.
- Interest rates vary by product but are broadly competitive
- Business options for building credit are available.
Best for Low Payments: SeedFi
SeedFi is the best credit-builder loan provider for borrowers who can’t or don’t want to put much toward their loans each month. Its payment plans start at just $10 per month.
It gets better. SeedFi’s Credit Builder Prime plan is technically free — all the money you put in the plan’s savings account is yours, and SeedFi doesn’t deduct interest or fees. The catch is that you have to contribute at least $500 to get your money back, which can take more than four years at the $10 monthly minimum.
SeedFi also offers more traditional credit-builder loans through its Borrow & Grow plan. Here, you get access to a portion of your loan right away and the remainder after you complete your payment plan.
Additional features:
- You may receive up to $4,000 immediately with Borrow & Grow, although smaller amounts are more common.
- Borrow & Grow interest rates start around 8%
- Borrow & Grow payments start at $80 per month or $40 per week
- No credit check with Credit Builder Prime
Best Credit Builder Card: Self
Formerly known as Self Lender, Self is the best credit-builder loan company for folks who want to use a Credit Builder Account and a secured Self Visa® Credit Card to jumpstart their credit journeys.
The Self Credit Builder credit card, available as little as 3 months after your loan originates, allows you to choose which portion of your accumulated balance to use for securing the card. That’s your initial credit limit, which you can draw against as needed to make purchases online or out in the real world. It’s a flexible solution for active credit builders.
As for its traditional credit-builder loans, Self offers four loan plans tailored to different income levels and time horizons. The higher-priced plans deliver larger payouts when the loan term expires, while longer-term plans build your credit for longer and may result in a higher ending credit score:
- Small Builder: Pay $25 per month for 24 months to get $520 cash at the end of the term. The total cost is $89 for an effective APR of 15.92%.
- Medium Builder: Pay $35 per month for 24 months to get $724 cash at the end of the term. The total cost is $125 for an effective APR of 15.97%.
- Large Builder: Pay $48 per month for 24 months to get $992 cash at the end of the term. The total cost is $46 for an effective APR of 15.72%.
- X-Large Builder: Pay $150 per month for 24 months to get $3,076 cash at the end of the term. The total cost is $146 for an effective APR of 15.88%.
Self is unusually flexible and borrower-friendly, too. Additional features include:
- A flat administrative fee of just $9, regardless of loan plan
- No hard credit pull and no credit score required to apply
- Reports to all three major credit bureaus
- Cancel anytime before the end of the loan and get your payments back, minus interest and fees — without damaging your credit
Self Visa® Credit Card issued by Lead Bank or SouthState Bank, N.A., each Member FDIC. See self.inc for details.
Sample loans: $25/mo, 24 mos, $9 admin fee, 15.92% APR: $35/mo, 24 mos, $9 admin fee, 15.97% APR: $48/mo, 24 mos, $9 admin fee, 15.72% APR; $150/mo, 24 mos, $9 admin fee, 15.88% APR. See self.inc/pricing
Credit Builder Accounts & Certificates of Deposit made/held by Lead Bank, Sunrise Banks, N.A., and SouthState Bank, N.A. each Member FDIC. Subject to credit approval.
Best for Comprehensive Financial Services: MoneyLion
MoneyLion is the most well-rounded financial app on this list. With a built-in everyday bank account and debit card, it’s much more versatile than your typical credit-builder loan. Its capabilities include:
- Up to $1,000 in interest-free cash advances against your next pay cheque
- Round up your debit card purchases and convert the difference to bitcoin
- Earn cash-back rewards on eligible purchases
- Get your pay cheque up to two days early with eligible direct deposit
- Auto-invest starting with just $5 and pay no asset management fees
MoneyLion’s credit-builder loan boasts competitive interest rates and a short 12-month term, which means less paid in interest over the life of the loan. In exchange for a $19.99 monthly membership fee, you get additional features like:
- Immediate access to a portion of your funds
- Additional cash advances against your loan balance — up to $300 per pay period with no interest charges
- Robust credit monitoring tools
- Personalised credit-building tips and insights
Best for Credit Union Fans: Digital Federal Credit Union
Digital Federal Credit Union, or DCU, offers one of the most borrower-friendly credit-builder loans around. The headline is the very low interest rate — fixed at 5% APR.
That shouldn’t be a surprise, as DCU is a credit union known for low interest rates and competitive terms. If you’re looking to establish a new credit union relationship that’s not limited by geography while building credit, give DCU a closer look.
Additional features:
- Choose from 12- or 24-month terms
- Earn dividends (interest) as your savings balance grows
- Borrow $500 to $3,000, depending on your needs
Methodology: How We Select the Best Loans for Building Credit
We use several key criteria to evaluate credit-building personal loans and the lenders that offer them. Each relates in some way to the overall quality of these loans: their cost, ease of use, flexibility, and more.
Ease of Application
If you’re applying for a credit-builder loan, you might not be a seasoned borrower. This implies that you may lack familiarity with the intricate details of the credit application process.
That’s why we prefer credit-builder loan providers that make it easy to apply online in a single sitting. Although you should always expect to provide proof of identity, residence, and income, you shouldn’t have to fax these documents or bring them to a physical bank branch.
Unless you want to, of course.
Credit Check
Credit-builder loans aren’t as risky as they seem. The lender often keeps the proceeds in an account they control, so if anything goes wrong, they can simply take your money and close out the loan.
Nevertheless, some lenders do require hard credit pulls as a condition of underwriting. Where possible, we look for lenders that don’t have this extra requirement. Instead, they allow borrowers to apply with just a soft credit check or no credit check at all.
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Loan Term: Credit-builder loan terms are generally short, often just one to two years. If you need more time to pay off your loan, look for a lender that’s a bit more flexible on this point.
We’re fans of providers that go all the way up to five years. Just remember that you’ll pay more interest over the life of a longer-term loan, even if the interest rate and loan amount are the same.
Loan Fees
Credit-builder loans aren’t known for excessive fees. However, some providers charge monthly or annual membership fees that cover the cost of the loan and other associated benefits. These aren’t necessarily dealbreakers, but we prefer lenders that omit them.
Other possible loan fees include origination fees and late payment fees. Again, we prefer lenders that keep these to a minimum.
Interest Rate
Interest rates for credit-builder loans typically come in lower than those for secured credit cards. This is great for borrowers who don’t want to pay massive amounts of interest over the life of a loan. But small differences in the rate can still add up, so we’re mindful of who’s charging what.
Loan Amount
Credit-builder loans tend to be small. When the primary purpose of the loan is to build credit, and you might not even have access to the funds, this is acceptable. It has the added benefit of keeping monthly payments low.
All that said, we prefer lenders that offer the option of larger loans — upwards of $1,500 where possible. That way, you’ll have a bigger windfall when you pay off the loan.
Access to Funds
Many credit-builder loan providers restrict access to loan proceeds until the term ends. This limits their risk and helps keep interest rates low.
However, we do appreciate more lenient lenders. And we’re especially fond of lenders that let you cancel your loan in the middle of the term if you’re struggling to make payments. By doing this, you should be able to recover any principal you’ve paid, ensuring that your efforts have not been in vain.
Become a Credit-Builder Loan Expert: Your Questions Answered (The Best Credit Builder Loans)
You have questions about credit-builder loans. We have answers.
What Is a Credit-Builder Loan?
A credit-builder loan is an instalment loan specifically designed to build the borrower’s credit. It usually has the following features:
- Low loan principal, typically under $3,000
- Relatively low interest rates in comparison to credit cards
- Relatively short loan terms, often under five years
- Restrictions on how you can use the proceeds before paying off the loan
Don’t confuse credit-builder loans with credit-builder lines of credit or secured credit cards. While these products have similar purposes, their interest rates tend to be higher, and their terms are open-ended, meaning you can carry a balance indefinitely as long as you make minimum payments.
Can a Credit-Builder Loan Hurt Your Credit Score?
If you don’t make your payments on time or stop paying your loan altogether, a credit-builder loan can definitely hurt your credit score.
As with any other loan or line of credit—or any other bill, for that matter—you need to make good on your promise to repay your credit-building loan on time and in full. Otherwise, your credit score could end your loan term in worse shape than it began.
How Much Does a Credit-Builder Loan Cost?
It depends on the interest rate, fees, and loan amount. Credit-builder loans generally have lower interest rates than credit cards, but the fees can add up. Look for a loan with a low or nonexistent origination fee and no ongoing “membership fee,” which really just adds to the total cost (and effective interest rate) of the loan.
What If You Can’t Make Payments on Your Credit-Builder Loan?
Talk to your lender about options for modifying or deferring your loan payments. The lender may require you to show that you’re experiencing financial hardship due to job loss, reduced work hours, or an unexpected financial emergency.
You shouldn’t expect your lender to work with you to reduce or suspend your payments. If they allow you to cancel your loan and pocket any principal you’ve paid so far, consider taking the deal. It’s better than the alternative — defaulting on your loan, forfeiting the proceeds, and seriously damaging your credit.
How to Choose the Best Loan for Building Credit (The Best Credit Builder Loans)
Start by assessing your strengths and weaknesses as a borrower.
If you’re truly new to credit — as in, you don’t even have a credit score — you’ll need to stick to loans that don’t require a credit check. If you have a credit score that isn’t where you want it, you can look for loans that require credit pulls.
From there, look for reasonably priced loans with favourable interest rates, low fees, and flexible terms. If you intend to use your loan to initiate your emergency savings fund, ensure that the loan size is sufficient and that you can easily access your funds after the loan term ends.
Remember to carefully review the fine print included in your loan. Make sure the lender reports your payment history to all three major credit bureaus: TransUnion, Equifax, and Experian. Please ensure that there are no recurring fees, or if there are, that they are reasonable. And make sure you meet any minimum borrowing requirements that the lender discloses upfront, such as a minimum income or credit score.
Finally, if you’re not finding any suitable credit-builder loans, consider pausing your search and working to improve your credit score. Do this well enough and you might find you have no use for a credit-building loan after all. You can skip right to more appealing financial products, like cash-back credit cards.`
