Costs, benefits and who is it for?
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- Self-financing is an online lender that offers home builder loans that can increase your credit score.
- Customers pay Self in monthly installments, starting at just $ 25 per month.
- A personal loan might be a good option if you don’t have credit or have a bad credit history.
- Self-report all of your payment activity to the three major credit bureaus, so make sure you are able to make each monthly payment on time to avoid damaging your credit.
- See the Business Insider Guide to the Best Personal Loans »
Credit card maybe a useful tool to increase your credit score, helping you to demonstrate credit bureaus that you can make your payments on time. But what are you doing if you cannot get the approval of the card you want, can’t afford to pay the security deposit on a secure card, or just want to increase your credit without being tempted to overspend?
Enter the credit-builder loan, designed specifically to help you boost your credit score by paying your lender in installments that are saved and ultimately you are paid off. You can find home builder loans at local banks and credit unions, although membership qualifications can be a barrier for some people.
Fortunately, there is an alternative, and that is Self-financing. Self, an Austin, Texas-based startup founded in 2014, is an online lender that offers 12- and 24-month credit loans to help clients with little to no credit build their payment history. .
How Self-Funded Loans Work
The first step is to choose a loan based on the amount you want to pay monthly.
You can choose from four options:
- $ 25 per month for 24 months
- $ 35 per month for 24 months
- $ 48 per month for 12 months
- $ 150 per month over 12 months
After making your choice, complete an application to open a credit account, supported by Self’s FDIC– approved financial partners. Once approved, you can activate your account with a one-time, non-refundable administrative fee of $ 9.
At this point, Self will issue your loan, but instead of giving you the funds directly, it will put the money in a certificate of deposit (CD). When you make your monthly payments, Self reports your payment activity to the three major credit bureaus, Experian, Equifax, and TransUnion.
When you have paid off the loan, the CD will unlock and the money you paid will come back to you within about two weeks, minus any interest and unpaid fees.
Who are auto loans for?
If you have No credit or one damaged credit score requiring repair, Self could be an attractive option for you. Payment history represents 35% of your FICO credit score, so the ability to show agencies that you can make timely payments can go a long way in helping you get on the right track with credit.
Plus, the service is easy to use and affordable, giving it a head start over credit loans from other sources. With Self, you won’t have to meet the demands of a credit union and you can increase your credit for as little as $ 25 per month.
In case it is not obvious, if you are not sure if you can make your payments, it probably is not the best time to open a Self account. The service reports your payment activity whether or not your payments are on time, which means that if you miss one or more, you could end up doing more harm than good to your credit score.
Other options to consider for mortgage loan
Of course, there are other options for those who want to give their credit rating a makeover, but they are not necessarily viable for everyone.
Concrete example ? the secure credit card. Those with little or no credit can usually get approved for a secured credit card, provided they can deposit a security deposit. But that deposit can require up to $ 200 or $ 300, which some people cannot afford to deposit all at once.
A Personal loan is another route to building credit, although lenders tend to charge very high interest rates on loans to those with bad credit. Become a authorized user on someone else’s credit card can also do the trick, assuming the primary cardholder makes the payments on time – you’ll need a friend or family member willing to bring you to their account.
If you are sold on a home builder loan but not ready to settle on Self Financial, consider Kikoff, another online lender. Kikoff works the same as Self, but it has a few key differences, including its one-time $ 12 loan. Customers pay off this loan in 12 monthly installments of $ 1 each, and Kikoff doesn’t charge any fees to get started.