What is a Credit Builder Loan? And is it Right For You?

Are you wondering, “what is a credit builder loan?” In this article, I go over everything about it and how you can get started getting one.

Figuring out how you can build your credit is a mystery for many consumers. Indeed, it’s a question many ask when they don’t know how credit works. Luckily, there are different ways to build credit despite having a low credit score, or even no credit score. One of the excellent ways to improve a credit score is by getting a loan.

The Mechanics of Credit Builder Loans

When I was 18, like millions of consumers, I had no credit. I could not get a credit card without a credit score, and I didn’t know anything about secured credit cards. A friend of mine suggested I could improve my credit score by getting a loan from one of those places with neon lights, as they report the payment history to the credit bureau. And once the loan gets paid, I would have a credit score high enough to get a credit card.

So that’s what I did. I went to the store with the neon lights and promptly got a loan for $1,000. It was a signature loan, and I had to repay $101.97 a month for 12 months. Easy, I thought! But, I failed to understand that this loan came with a 39% APR! Instead, I saw it as paying $223.64 in interest. At the time, I…