Credit Builder Loans
If you’re worried about being able to borrow money in the future, a credit builder loan can help you rejuvenate your credit score and give you access to mortgages, loans and better credit cards in the future.
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What are credit builder loans?
Credit builder loans allow people to borrow a set amount of money and pay it back. The idea is to meet every repayment on time and gradually build up your credit score.
As many individuals with poor borrowing histories struggle to get a traditional loan, a credit builder loan can help you to prepare for the future.
How do credit builder loans work?
Credit builder borrowing agreements are different to the standard loans you often see from mainstream lenders. Some lenders require people to make monthly payments, and then the loan is released to them – but it depends on your credit score and repayment history.
Some credit builder loans offer money upfront, but again, it depends on your personal circumstances.
Who can take out credit builder loans?
When most people borrow money, they want to access the funds immediately and then pay it back. Individuals with a bad – or no – credit history, unfortunately don’t have the same options as people with good or excellent credit scores – which is where a credit builder loan can help you out, by building your credit score.
Getting a mortgage is harder than ever, but if you have a strong score and stable history of repayments, you’ll have access to more opportunities from more lenders.
How much can I borrow?
Because these sorts of loans AREN’T like a typical loan, the amount of money you could borrow is much less than you might expect. For example, personal loans typically allow a maximum amount of £25,000, but credit builder loans have a maximum amount of £5000.
You could find, if your score is really bad, that lenders will cap the amount at £1000, but again, it depends on your credit check results and if you’ve had any issues with repayments in the past.
The pros and cons of credit-building loans
There are numerous things to consider when taking out a credit builder loan – including whether you can make the fixed payments on time. It’s also good to know what you’re getting into, so let’s look at their pros and cons.
Pro: These loans build credit scores
If your property is worth £300,000, but your mortgage equates to £250,000, you’ll have £50,000 in equity – as that’s the amount you actually own. You could borrow around £40,000, but some lenders offer higher LTV (loan-to-value rates).
Pro: Credit reference agencies will pay attention
While secured borrowing offers many benefits over unsecured loans, there can still be some issues that occur. For example, if you fail to keep up with your repayments, your lender could repossess your property.
Pro: You receive money for being responsible
As many lenders prefer to release the payment near – or at – the end of your term, you’ll receive a fixed sum of money when you successfully make repayments.
Con: These loans aren’t ideal for large purchases
If you want to borrow a lot of money, a credit builder loan probably isn’t for you. Some people might find they’re better off choosing an alternative solution.
Con: Not all providers offer them
While most providers offer a range of other loans, credit builders are less popular. In most cases, you can only access them through some credit unions and specialist providers.
Con: You won’t get the money immediately
Some lenders will allow you to access the money and then make repayments, but the usual agreement is repaying the loan first and then accessing the funds.
What are the alternatives to a credit builder loan?
If you aren’t able to get a personal loan and are trying to figure out if credit builder loans are the right solution, there are some other options available:
Secured credit card
A secured credit card differs from traditional cards because they offer lenders more security. For example, if you want a specific credit limit, you’ll pay the card issuer a deposit upfront which guarantees your line of credit.
Having some money to deposit is an excellent way to build your credit score, but you’ll only be successful if you have disposable cash.
Credit builder cards
In many ways, credit builder cards are similar to credit builder loans. However, the cards often come with low allowances and are mainly tools to increase your score. You can use some money each month and pay it back on time, giving you access to better options.
Check if your credit history is accurate
It’s common for people to have a low credit score and not realise what’s causing it. For example, you might not be on the electoral register or haven’t updated it since you moved house.
Also, even a small missed payment can negatively impact your file. You should always check with a credit reference agency to see if your details are correct because it could help you increase your loan amount.
About Company
With Believe Money, bad credit isn’t an obstacle to accessing affordable finance and loan options. As a finance broker we have access to hundreds of finance providers and exclusive deals to get you the best option for your circumstances. Even if you have defaults, CCJs and bankruptcy on your credit file, our advisors work hard to get you the finance you need.
We specialise in bad credit finance including secured loans for bad credit, bad credit debt consolidation and loans to build credit. So if you’re concerned about your credit rating and your ability to borrow money, get in touch or give us a call on 01302 591 360 for free, helpful advice.
Why Use Believe Money?
Believe Money is an award-winning finance broker dedicated to offering the best range of affordable loan options. Whatever your circumstances or credit rating, we’re committed to getting you the best secured loan interest rates by searching our entire panel of secured loan provides.
Whatever you need a secured loan for, we’re here to help. Our specialist advisors are available Monday to Friday, so if you need any help please contact us online or give us a call on 01302 591 360.
FAQs
How Believe Money works
Step 1.
Simple, easy application
Step 2.
We search our panel of lenders to find the deal that’s right for you
Step 3.
When you confirm your chosen deal, we get your application moving
Step 4.
The money lands in your bank account - usually within two weeks
Need some help getting a credit builder loan? We can help
Believe Money works with clients from all backgrounds, helping them to find the right borrowing solution. Finding the right credit union that offers these loans can be difficult because they’re less common than secured and personal borrowing arrangements.
As a broker, we have access to a range of specialist lenders, not just mainstream online lenders. Here’s what you get when you work with us:
- Specialist lenders who work with people with poor credit
- A stress-free application process
- Zero upfront fees (We add them to your loan)
- An award-winning loans broker by your side
To find out more or to explore how to take out a credit builder loan, book a free consultation today. We look forward to helping you secure a credit builder loan.
Open up new opportunities with a credit builder loan from Believe Money
There are numerous things to consider when taking out a credit builder loan – including whether you can make the fixed payments on time. It’s also good to know what you’re getting into, so let’s look at their pros and cons.Having a poor credit score can negatively impact your financial future, and with the current economic difficulties and the resultant higher borrowing rates, if your credit score is low, it might seem that borrowing money is off the table for you.
So, if you’re worried about being able to borrow money in the future, a credit builder loan can help you rejuvenate your credit score and give you access to mortgages, loans and better credit cards in the future.
Believe Money is a specialist loans broker working with clients across the UK. We’ll give you access to a wide range of lenders, offering favourable loan interest rates.
We compare loans from our panel of the UK's top lenders to get you the best deal.
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