Credit Builder Loan
How to Get a Credit Builder Loan
When you’re just starting in life, you need ways to get your credit score up. That’s where a Credit Builder Loan comes in. You don’t need a good credit score, or even one at all, to take out these loans. The only thing loaners will look for is an income so you can make payments. Let’s look a little closer at how these loans work.
How does a Credit Builder Loan Work?
Think of this loan as similar to a layaway. In the end, instead of getting a TV, you get the amount of the loan. The money goes into a particular savings account, and it’ll be inaccessible until you make all the payments. It’s helpful for young adults without credit history or people trying to fix their credit scores.
Why Would You Take Out a Credit Builder Loan?
If you want to know how to fix your credit, this is a quick and easy way. There isn’t as much risk involved in this as there is in other credit lines or loans. Since you get the money back immediately after paying it all off, it pays for itself. Better yet, it pays for your future. You won’t be able to get a mortgage or a high-rewards credit card with no history. A simple credit builder loan gives you that history. If you keep a steady source of income, it’s easier to pay off than other debts.
How Much Does a Credit Builder Loan Cost?
As with any loan, costs tend to vary between providers. We can help you find these loans as a part of your credit repair. Contact us before you start shopping around to have the best chance of a loan that meets your needs. There are, however, some standard fees.
- Administrative Fees: Pre-qualification, you’ll need to pay a small fee. It’s usually around $8-$15, so it’s not expensive.
- Interest: Like any loan, a credit builder loan will charge interest. While the amount varies from provider to provider, it tends to be 6 to 16 percent.
- Your Monthly Payments: How much you pay is determined by how much you borrowed. These loans can range in amounts from $300 to $1000. Pick what you can afford, and remember to pay it off quickly and on time. “How long do late payments stay on my credit report,” you ask? Unfortunately, it could stay for up to seven years. So watch out for that.
- Other costs:Some lenders will charge late payment fees or application fees. This is especially true if this is your first loan. Be aware of any fees associated with your loan.
When Is a Credit Builder Loan Not Worth It?
Sometimes, it’s not entirely worth it to take out a credit builder loan. For instance, in these situations:
You don’t have a source of income to make payments
This is one of the most common ways people get into trouble with such a loan. Late payments on this kind of loan will impact your credit score both quickly and majorly. Before you take out this kind of loan, make sure you can pay for it.
You need the funds right away
Remember, this loan is the reverse of a traditional one. You won’t get the money until you pay for it. If you need the money fast for an emergency or large purchase, a conventional loan might be the better choice. There are plenty of these, even for an unestablished borrower.
You have a long negative history
Studies have shown that credit builder loans are better for unestablished credit than they are for negative credit. The CFPB said that those without pre-existing debt saw a much higher score increase than those with it. This makes sense, as older debts and payments hold more weight than newer ones.
How Do I Get a Credit Builder Loan?
There are many ways and institutions to help you get a loan. You can find them at:
- Credit Unions. Credit unions are one of the best places to find these loans. To do so, however, you need to become a member. You can live near them, or work for a specific company, to meet their membership requirements. There might also be membership fees to watch out for.
- Community Banks. Local banks are another great place to find credit builder loans. Search online or call your local banks. They may have a loan that fits your lifestyle.
- Online Lenders.In this day and age, you can do many things online. This includes taking out loans. Finance companies are finding out about this new market. They will be happy to help you take out these loans.
How Else Can I Fix My Credit?
There are many options:
You can become an authorized user on someone else’s credit card line. If you have a loved one who’s good at paying bills on time, you can ask them for help. A personal loan is another good choice. Nowadays, some credit cards are tailored for building credit. Just remember to keep on top of payments.
It all boils down to adding more tradelines for credit boosting. “What are tradelines?” you ask? They’re just a fancy term for credit card accounts you can be added to. They’ll help boost both your Credit Karma score and FICO score.
Whatever kind of help you need with your credit, we at 007 Credit Agent can assist.