Self offers credit builder loans to help credit-invisible individuals. Being credit invisible means that your credit history is limited, so you either have no credit or a low credit score. If you are looking for an alternative to a secured credit card, then a credit builder account may be the solution for you. Learn more about credit builder loan providers and how these loans work.
Self Credit Builder Loans: What You Need to Know
Self is a financial technology company that started in 2015. Their company mission is to help individuals improve their credit. Self offers various products, such as the Self Credit Builder Loan and a Self Visa credit card. According to their data, the average borrower with a Self Credit Builder Account can increase their credit score by 47 points.²
What’s a Credit Builder Loan?
A credit builder loan is an installment loan that can help borrowers establish or improve their credit history while also saving money. Unlike a traditional loan, the borrower does not receive the loan amount upfront. Instead, the lender deposits the amount into a secure account.
The borrower makes monthly payments, which the lender reports to at least one of the three major credit bureaus. Your payment history, one of the key factors affecting credit, makes up 35% of your total FICO Score. Borrowers can improve their creditworthiness over time by making their monthly payments on time.
Once a borrower finishes their last loan payment, the lender will provide them with the full loan amount minus interest and fees. According to the Consumer Financial Protection Bureau, credit builder loans can boost credit scores by up to 60 points.¹ If you struggle with a thin credit file, then a credit builder account may be an option to consider.
How To Get Online Credit Builder Loans With Self
Borrowers can get a Self Credit Builder Loan by signing up for a Self credit builder account. But you must meet the following requirements to qualify for a Self credit builder account:
- Be at least 18 years old.
- Be a permanent U.S. resident.
- Have a Social Security number.
- Have an active bank account or debit card; a prepaid card is OK.
Self does not perform a hard credit check when you apply for an account. A hard credit check is when the lender pulls your credit reports from the credit bureaus. However, Self does report your payment history to all three major credit bureaus, so it’s critical to avoid late monthly payments.
How Much Does It Cost To Build Credit With Self?
Self offers four credit builder plans: small, medium, large, and extra large. The monthly payment amount and total interest you pay depend on the loan plan you choose, with each plan requiring a 24-month commitment.
- Small — The small plan costs $24 monthly. The total loan is $600 and will cost $89. Borrowers receive $511 back.
- Medium — The medium plan costs $35 monthly. The total loan is $840 and will cost $123. Borrowers receive $717 back.
- Large — The large plan costs $48 monthly. The total loan is $1,152 and will cost $167. Borrowers receive $985 back.
- X-Large — The extra large plan costs $150 monthly. The total loan is $3,600 and will cost $531. Borrowers receive $3,069 back.
What Are People Saying About the Self Credit Builder Account?
Over 6,000,000 people have used Self products to improve their credit scores. But before you apply for the Self Visa Credit Card or the Self Credit Builder Loan, it’s critical to read what people have to say about Self.
Self Credit Builder Loan Reviews
Here’s what Self customers have to say about credit builder loans:
| “This is a remarkable tool to help build your credit easy and worry free.” – Juanita | “My score actually went up 33 points using this app. Kudos to Self for helping me achieve my goals.” – Raydell | “Helped my credit better than anything else I tried. Simply the best!” – Ollie |
Self Credit Builder Plans vs. Loans for Bad Credit
Credit builder loans differ from bad credit loans, although they are both meant for low-credit borrowers. Here’s a table that helps explain the differences so you can choose the best credit-building tool to help you achieve your financial goals.
| Feature | Credit Builder Loans | Bad Credit Loans |
| Purpose | Specifically designed to help individuals build or improve their credit score. | Designed to provide immediate funds to individuals with poor credit histories. |
| Credit Requirement | Generally available to individuals with no credit or poor credit. | Available to individuals with poor credit, often with no minimum credit score. |
| Loan Amounts | Typically small, ranging from a few hundred to a few thousand dollars. | Can vary widely, often higher than credit builder loans, depending on the lender. |
| Interest Rates | Usually low to moderate; the focus is on building credit rather than profit for the lender. | Typically very high due to the increased risk associated with bad credit. |
| Access to Funds | Funds are held in a secured account until the loan is fully repaid. | Funds are typically available immediately after approval. |
| Impact on Credit Score | Positive impact if payments are made on time, as activity is reported to credit bureaus. | Can be positive if managed well, but the potential for high interest could lead to further financial strain. |
| Risk | Low risk of worsening credit if managed properly; acts as a forced saving mechanism. | High risk due to high interest rates and potential for debt accumulation. |
Disclaimer: This table is intended for informational purposes only and should not be considered financial advice. The features and details of Credit Builder Loans and Bad Credit Loans can vary significantly between different financial institutions and jurisdictions. It is essential to conduct thorough research and consider your financial situation and needs before choosing a loan product. Additionally, always consult with a qualified financial advisor to understand the implications of any financial product and how it fits into your overall financial plan.
Who Benefits the Most From Credit Builder Loans?
Self Credit Builder Loans are meant for individuals who have a thin credit file or who are currently credit invisible. It can be challenging to build credit because you typically need credit to get credit, which is a frustrating paradox.
A credit score is a necessary financial tool that directly affects your life. A limited credit history can make it extremely difficult to buy a car, rent, and qualify for loans. But by building your credit score, you can qualify for better loan offers. For example, someone with good or excellent credit may get a higher credit limit or lower interest rate.
Pros and Cons of Using Loans to Build Credit
There are advantages and disadvantages for every credit-building product. Here’s a breakdown of the pros and cons of credit builder loans to help you decide if this financial tool is right for you.
Pros of Credit Builder Loans
- Improves Credit Score — Timely payments are reported to credit bureaus, which can help borrowers build or improve their credit history.
- Savings Component — At the end of the loan term, borrowers receive the principal amount, which can encourage savings.
- Accessible — Often very accessible to people with poor or no credit history.
- Financial Discipline — Encourages regular saving habits as the loan must be repaid over a set period.
Cons of Credit Builder Loans
- Interest Costs — Borrowers pay interest and sometimes additional fees, which don’t apply to traditional saving methods.
- Debt Risk — If the borrower fails to make payments, it could lead to negative marks on their credit reports.
- Limited Access to Funds — Money borrowed is not immediately accessible and is typically held in a secured account until the loan is repaid.
- Not a Quick Fix — Building credit takes time, and the impact on the credit score might not be immediate.
Frequently Asked Questions About Credit Builder Loans
To get a credit building loan, you must be at least 18 years of age. You must also have sufficient income, an active credit union or bank account, and a valid form of identification. Depending on the lender, you may also need to provide additional information.
Credit builder loans work like traditional installment loans. However, the borrower does not receive any money until they complete the repayment process. Once the borrower finishes paying the loan, they can receive their money via direct deposit.
Credit-building loans help borrowers build credit by establishing a positive credit history. Lenders report monthly payments to the three credit bureaus. Credit reports are updated with this information, helping to boost credit scores over time.
You can find credit-building loans at banks, credit unions, or through online lenders. When searching for a credit building loan, it’s critical to compare your options before making a decision.
The best credit builder loans will send your payment information to all three credit bureaus. This ensures your positive payment information is reflected on all your credit reports. It’s also in your best interest to compare lenders to find the lowest rates and fees.
You can cancel your Self loan or Self Visa credit card at any time online, through the app, or over the phone. After canceling, you will receive a payout for the money you paid into your account, minus interest and fees.
Lenders cannot guarantee approval on loans because approval is typically based on various requirements. However, you are more likely to get approved for loans with bad credit through bad credit lenders.
A borrower with low credit can improve their credit by using a secured credit card or loan. A secured credit card works similarly to a debit card, but you pay interest on payments if you don’t pay your bill in full every month. Secured loans require collateral, such as a car or property. While secured loans can help you build credit, they are financially risky.
Bottom Line: Credit Builder Loans
Credit builder loans are convenient for people who need help building their credit. If you have trouble qualifying for traditional loans, then a credit builder loan may help you improve your payment history, which makes up 35% of your credit score.
If this loan seems like a good option for you, take time to compare lenders to find the best offer for your budget and financial goals.
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