Best $1000 Credit Builder Loans
By Noah Gomez
Published: 4 August 2024
Credit-builders for $1,000 work best for people with negative accounts under $1k on their credit report. The principle behind this is called "meet or exceed." It just means you look more trustworthy to lenders when you show healthy management of a loan larger than one on which you made a mistake earlier.
For example, if you miss a payment on a $1,000 loan but only have one $500 in good standing, it doesn't look as trustworthy as one $1,500 in good standing.
In general, we don't recommend $1,000 credit-builders for borrowers with zero credit history because a $500 is enough to get your on the map (except in rare cases where you're planning a short-term mortgage, car loan or other personal loan).
Comparative Summary of 7 Offers
#1 Pick
Ava
Best Overall
Est. APR (%): 2
Avg. Principal ($): 252
Avg. Duration (mnths): 12
Credit Check: No Credit Check
Ava checks almost all of the boxes. You can get $1,000 in total principal by selecting monthly payments of about $85 over 12 months or about $42 over 24 months (precise amounts available in application process).
Some additional benefits are that Ava does not run a credit check and is available entirely online.
The nuance with Ava is that the loan is provided at 0% interest because you instead pay a $9 monthly subscription or $6/month annually (we recommend the annual). After crunching the numbers, this still comes out less expensive than most other $1,000 options.
#2 Pick
Vermont State Employees Credit Union
Best for Low Interest
Est. APR (%): 3
Avg. Principal: 650
Avg. Duration (mnths): 12
Credit Check: Soft Inquiry
Vermont's State Employees Credit Union is a top contender for credit builders of almost any kind. Available nationwide and with APR under 3%, you can get a $1,000 CBL for a fixed duration of 12 months. VSECU only runs a soft inquiry, so you don't need to worry about any small score drops from a hard pull.
Most importantly, this is the only $1,000 on our list that costs less than Ava. For low interest and overall cost, you can join VSECU with a $8 yearly subscription to the Financial Fitness Association non-profit, and you only need $5 in a savings account to maintain eligibility.
#3 Pick
Cooperative Federal Credit Union
Best for Term Length Options
Est. APR (%): 3.95
Avg. Principal ($): 1150
Avg. Duration (mnths): 21
Credit Check: Hard Inquiry
Cooperative Federal runs a tough bargain for second place because it has extremely flexible term lengths from 6 — 36 months and APR half the national average at just under 4%. It's available in almost any state by subscribing to Inclusive Economy CNY for $5 (one-time lifetime membership).
#4 Pick
Self-Help Federal Credit Union
Best Ideology
Est. APR (%): 4
Avg. Principal ($):
Avg. Duration (mnths): 15
Credit Check: Soft Inquiry
Self-Help's offer is very similar to Cooperative, with comparable 4% APR, but it only runs a soft credit inquiry whereas Cooperative runs a hard inquiry.
The downside to Self-Help is that term lengths are slightly more limited, with a range from 6 months to 24 months (instead of 36).
What really sets Self-Help apart is the ideological element. It's available nationwide with a simple $5 payment and "believe" in the credit union's mission.
#5 Pick
Digital Federal Credit Union
Best for Overall Banking Services
Est. APR (%): 5
Avg. Principal ($): 1750
Avg. Duration (mnths): 18
Credit Check: Hard Inquiry
If you're interested in switching banking institutions for reasons other than the credit builder loan, Digital Federal Credit Union may be a good choice. As one of the nation's older credit unions and still today one of the largest, DCU offers a near-full suite of services.
Factually speaking, DCU's offer is also among the more competitive in the $1,000 range. At 5%, APR is below the national average by several percentage points, and it's available from 12 to 24 months.
For borrowers outside the field of membership, you can get membership eligibility with a $10 yearly membership to Reach Out for Schools, and maintain $5 minimum on deposit at the credit union.
#6 Pick
CreditStrong
Best for Long Durations
Est. APR (%): 15.62
Avg. Principal ($): 1050
Avg. Duration (mnths): 36
Credit Check: Soft Inquiry
It's rare for lenders to consider credit builders for longer than 3 years for the simple reason that they are supposed to generate results more quickly, and they do for the average borrower.
However, those with healthy cash reserves but more sizeable negative marks may need longer durations to establish sufficient payment history to counterbalance their negative marks.
CreditStrong's 24 — 48 terms at a relatively healthy sub-8% APR makes it the top contender for long term credit builder loans in the $1,000 range.
#7 Pick
BMO Bank
Best from Bank
Est. APR (%): 12.24
Avg. Principal ($): 1000
Avg. Duration (mnths): 36
Credit Check: Hard Inquiry
Lenders interested in an actual bank (not a credit union or digital lender) have a few options, but the best option for nationwide availability in the $1,000 range is BMO Bank.
It will cost slightly more than others on the list because APR comes in at just under 15%. The term lengths are also longer than most at 24 — 60 months, which produces a higher absolute cost of lending than others on this list.
That said, if you prefer a classic banking institutions then BMO is likely the best option for you in the $1k space.
Evaluation Criteria
We base our selection on quantitative information collected and stored in a proprietary database, which represents the largest aggregation of credit builder loans in the world.
To
accommodate the largest number of consumers, we assume an optimal loan
duration as any term between 6 and 24 months, with exceptions made for special cases such as BMO Bank and CreditStrong. These are included to accommodate borrowers looking for bank and online lenders.
Most importantly, we assume an
optimal loan principal of $1,000, with flexibility ranging from $500 to $3,000.
Finally, a decisive factor for this list is the availability of the
loan in all 50 U.S. states. Counterintuitively, many so-called local
credit unions are available nationwide through a system of non-profit
affiliation or belief alignment. They are the bedrock of our assessment.
What is a credit builder loan?
Credit builders are personal loans that help consumers with little or no credit improve
their score by applying a combination of flexible eligibility criteria
and deferred principal distribution. Lenders include banks, credit
unions, and online lenders at an average principal of $3,283 and APR of 7.78%.
Read more here.
Are credit builder loans worth it?
They are worth it if you struggle to get normal personal loans, you have
damaged or zero credit history, or you simply have no installment
credit on your report.
Critiques sometimes call them gimmicky, but
the reality is that they get around a common misconception: that your
credit depends on the amount you borrow. It does not. A small principal
loan, even with above-average interest, costs pennies compared to the
benefits you gain from having positive installment history on your
report.
Thick Credit is not a credit repair organization, a credit conseling agency, or a debtor education providor. It does not act on your behalf to communicate with credit reporting agencies or provide pre-bankruptcy credit counseling and pre-discharge debtor education for bankruptcy.
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