Best Small Credit Builder Loans ($200 — $500)

By Noah Gomez
Published: 4 August 2024

Small credit builder loans make most sense when you have zero credit history, or equally small negative marks on your report. For example, if you have a late payment on a credit card balance of $200, a credit builder loan for $200 or greater is a good idea. This is what we refer to as the principal of "equal or exceed" for credit building products.

But choosing a small credit-builder is easier said than done. Some lenders lure you in with small principal values but charge unreasonably high rates, or even use "zero interest" marketing to hit you with hefty membership fees. The truth is that lenders know consumers don't have the time or patience to deal with the fine print.

That's why we created this shortlist of the best 7 small credit builder loans, ideal for consumers in different situations and ranging from

Comparative Summary of 7 Offers

#1 Pick

Vermont State Employees Credit Union

Best Overall

Est. APR (%): 3
Avg. Principal ($): 650
Avg. Duration (mnths): 12
Credit Check: Soft Inquiry

Minimum Principal: $300

Quite simply, VSECU's offer has the lowest APR of any credit-builder available in all 50 states. It only runs a soft inquiry, which means you risk nothing by applying (hard inquiries aren't terrible but can hurt your score by a few points for 6 months or so).

Unlike most credit unions, VSECU allows anyone to become a member via a complimentary membership at the American Consumer Council (ACC) or with a $8 yearly subscription to the Financial Fitness Association. The only other criteria is maintaining $5 on deposit.

For most people, this is the best choice for small building needs.

#2 Pick

Self-Help Federal Credit Union

Best Ideology

Est. APR (%): 4
Avg. Principal:
Avg. Duration (mnths): 15
Credit Check: Soft Inquiry

Minimum Principal: $500

Another nationwide credit builder with small principal is Self-Help credit union. With 7.53% APR and 6 — 24 term lengths, the terms are roughly equivalent to VSECU, with the benefit of short 6 month term.

But the true differentiating factor for Self-Help credit union is its ideology. Those living in its field of membership (primarily California, Illinois, and Wisconsin) can join for free, and outsiders can join with a $5 one-time fee and the simple belief in the credit union's purpose.

#3 Pick

Cooperative Federal Credit Union

Best for Long Duration

Est. APR (%): 3.95
Avg. Principal ($): 1150
Avg. Duration (mnths): 21
Credit Check: Hard Inquiry

Minimum Principal: $300

Cooperative Federal's offer is roughly equivalent to Self-Help, with 7.53% APR and 6 month durations available.

However, it offers something no other lender can: $300 principal for 36 months (3 years). If you'd like to establish a long trail of payment history (the more is always the merrier for payment history), then this option is for you.

The best part is Cooperative is available nationwide. You can join the credit union by subscribing to Inclusive Economy CNY for $5 (one-time lifetime membership).

#4 Pick

Cambio

Best with Credit "Repair" Add On

Est. APR (%):
Avg. Principal ($): 300
Avg. Duration (mnths): 12
Credit Check: Soft Inquiry

Minimum Principal: $300

Cambio is a kind of black sheep in the credit builder loan space. They've changed a lot over the years and had their ups and downs, but it's hard to argue with their multi-product offer, which includes a kind of automated credit repair service (repair is mostly the removal of misplaced accounts from a borrower on another person's report).

We don't specialize in repair and generally believe it's something you can do yourself, but if you need it there's really nothing to lose going with a credit builder loan that includes it in the membership bundle.

Keep in mind that CFCU runs a hard inquiry, which will impact your score.

#5 Pick

Digital Federal Credit Union

Best for Continued Banking

Est. APR (%): 5
Avg. Principal ($): 1750
Avg. Duration (mnths): 18
Credit Check: Hard Inquiry

Minimum Principal: $50

Digital Federal Credit Union's name is slightly misleading. It's one of the largest credit unions in the nation because it's been an anchor in Massachusetts since 1979 when it started as support to the Digital Equipment Corporation.

Today, anyone in the nation can join with a $10 yearly membership to Reach Out for Schools, and maintain $5 minimum on deposit at the credit union.

If you expect continued banking needs after your credit builder loan, DFCU's breadth of services is likely to be among the most through and competitive you will find.

Despite the attractiveness of a low 5% APR, DFCU will run a hard inquiry, which is why we rank it lower on the list.

#6 Pick

Kovo

Best for Low Effort + Rewards

Est. APR (%):
Avg. Principal ($): 240
Avg. Duration (mnths): 24
Credit Check: No Credit Check

Minimum Principal: $240

Kovo is different from other credit builders. Rather than deposit payments in savings and distribute them at the end of the loan, Kovo simply takes each payment as compensation for its services. This is why the principal amount is so low; you effectively "pay" $10 per month to improve your profile.

This structure means Kovo is arguable the "easiest" credit builder in the market. It makes sense for small principal needs, though we wouldn't recommend it for those with higher negative marks.

If you just a "set it and forget it" solution, Kovo also provides a system of rewards as part of the service, which makes it the only one to our knowledge.

#7 Pick

KeyPoint Credit Union

Best for No Credit Check (AZ, CA, OR & TX)

Est. APR (%):
Avg. Principal ($): 500
Avg. Duration (mnths): 24
Credit Check: No Credit Check

Minimum Principal: $500

Keypoint credit union is the best option for a very specific profile: anyone with zero credit history residing in Arizona, California, Oregon, or Texas.

It has a "true zero" interest charge because this is primarily a tool to onboard young consumers in the area.

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. Additionally, we assume an optimal loan principal between $100 and $600, with the most desirable quantity as $500.

No exceptions to these ranges are made. This list has no conflicts between low loan APR and ideal principal + duration ranges.

Most importantly, the deciding factor for this 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.

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.

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