[VIDEO] What is a Credit Builder Loan and How Does it Build Credit?

Official blog of Refresh Financial

[VIDEO] What is a credit builder loan and how does it build or rebuild credit?

If you need to build or rebuild credit without putting down any money up front, a credit builder loan (also known as a cash secured loan, or a credit builder program etc.) could be what you need. It’s not the most common option you’ll stumble across to rebuild credit, but it is, by far, the easiest and most painless way.

 

With a credit builder loan, the proceeds of the loan are held for you in a savings account while you pay it off. As you build equity with your monthly payments, you can access portions of the savings or wait until the entire program is paid off and take the proceeds in one lump sum. Your payments each month are reported to the credit bureaus just like your payments to a credit card or a line of credit would be. It appears, on your credit report as an installment loan. As long as you keep the rest of your credit usage and payments in check, these credit builder loans are an excellent way to rebuild your credit score.

When you have to rebuild credit, it can seem like an insurmountable task. Especially if you’ve had to declare bankruptcy or go through a consumer proposal in the past. It seems like everywhere you turn, lenders are not willing to help you or require money down that you don’t have. You’re being declined for credit cards, loans and lines of credit and it seems like you’ve run out of options to rebuild credit.

It’s important to keep in mind, however, that if you want to rebuild credit, it's not impossible, especially with credit building programs.

Reasons to build or rebuild credit with a Credit Builder Loan:

1. It’s a great way to build or rebuild credit

The primary strength of a credit builder loan is in how it can build or rebuild credit. These types of credit builder programs are superior to other credit products because they pose low risk to you and to the lender, and is a cost-effective way to build your credit score as quickly as possible. As long as you faithfully make your payments every month, it's going to look like you're handling a regular loan with ease. This is important for lenders to see, as you want to look as responsible as possible. You are not going into debt in order to rebuild your credit, but your payments are reported to the credit bureaus and look the same as payments to any other installment type loan. By setting up an automatic payment schedule out of your bank account, there is very little that can go wrong here, and only things that can go right. You’re going to see your monthly payments improve your credit score over time, no matter what your credit history looks like.

2. Lower interest rates

If you’ve got anything less than great credit, you’re probably not going to get the best interest rates from credit card companies, even on a secured card. Taking out a credit builder loan will see you dealing with much lower interest rates than other credit products like credit cards. This means, in the long run, you’re going to save yourself a significant amount of money.

3. Convenience

A credit builder loan only takes minutes to apply for and up to 24 hours to approve. There is no need to come up with funds to secure the program and no matter what your credit history is, you can be up and running with a program to promote credit building in less than a day (no money up front, no credit checks!). Payments to the credit builder loan are set up as automatic withdrawals from your bank account, so you don’t even have to worry about missing a payment. It’s so simple, anyone can do it.

4. Easy to qualify

Whether your credit history is bad or good or you just have no credit at all, it doesn’t matter. Most people get approved for a credit builder loan at Refresh Financial no matter what their credit history looks like. That means no credit application anxiety.

5. Kick Start Your Savings

As you pay down your credit builder loan, the principal is being kept in a savings account for you. Why not continue to save after you’ve finished paying off the loan? What can you do with your savings?

  • Pay Off Your Debts

It feels great to throw a big chunk of money towards your debts and watch them disappear. It's also great for your credit score! Combined with the positive effects that a credit builder loan will have on your score, paying off your existing debts will boost your credit score even higher.

  • Save For A Down Payment on a House

With your rising credit score and a good chunk of money to start your savings with, you could finally buy your first home.

  • Use Your Savings Towards A Secured Card

If you want to boost your credit score even more after completing the credit builder loan, open up a secured line of credit or apply for a secured card with the money you've accumulated.

  • Use As A Down Payment On A Car

If you're tired of paying for endless repairs, it might be time to upgrade to a new vehicle. With your boosted credit score and the payout from the credit builder loan, it should super easy!

  • Use It As A Damage Deposit

If you're looking to move out on your own, this could be your ticket!

  • Invest In Your Career

You can use the payout from the credit builder loan to go back to school or upgrade your skills to better your chances at a promotion or raise.

  • Invest In Your Home

If you’re planning to increase the value of your home, this credit building program is a great excuse to finally get started on some home renovations.

  • Start An Education Fund For Your Kids

Sadly, this is something that many Canadians overlook. With the benefits of the credit builder loan, you can now tuck the payout away and watch it grow for your children down the road.

A credit builder loan from Refresh Financial can secure your financial future so you never have to worry again about being declined for a loan, or only being approved for one at astronomical interest rates.

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