Best Unsecured Credit Builder Loans (Money Upfront)
By Noah Gomez
Published: 4 August 2024
The first thing to know about "normal" credit builder loans is that they do not distribute funds up front, but unsecured types do indeed provide partial or all funds up front. They can do this by leaning on alternative creditworthiness metrics, which just means looking at factors off your credit report such as bank account activity (with your approval of course).
That said, lenders may use a membership structure to protect themselves against borrower default, or simply have stricter approval criteria than normal CBLs (though still less than traditional installment loans), and borrowers with severe negative marks may need to start with a payment-secured option.
Either way, we source this list from a proprietary database of credit builder loans available in the U.S. and ensure it is the most thorough summary available. For help compiling a credit building strategy that meets your cash needs, check out our rebuilder program.
Comparative Summary of 7 Offers
#1 Pick
MoneyLion
Best Overall
Est. APR (%): 17.99
Avg. Principal ($): 1000
Avg. Duration (mnths): 12
Credit Check: Soft Inquiry
Moneylion is the only credit builder that regularly provides a portion of the funds up front AND is available in a majority of states (40+). The offer does change over time, at one point offering 50% of loan principal up front, and as of writing it allows access to all paid-in cash at any time. This means it's not exactly the same as a traditional loan that distributes all of the money up front, but for someone with limited or damaged credit (you, if you're reading this), it's a good option.
Any money you leave in the account generates interest for you. The downside is that the "cost of borrowing" is a $19.99/month membership with Moneylion. This provides access to a host of other services such as a zero-interest cash advance and the option to place funds in an investment account rather than the traditional savings account.
#2 Pick
Upstart
Best for Long Duration
Est. APR (%): 20.3
Avg. Principal: 25500
Avg. Duration (mnths): 48
Credit Check: Hard Inquiry
Upstart is another option available across a majority of states (48). They focus on providing traditional loans (meaning the full value paid up front) without penalizing borrowers for previous debt behavior by leveraging advanced risk analysis rather than the traditional credit profile assessment & approval.
This doesn't mean Upstart avoids credit pulls. On the contrary, they will run a hard inquiry. However, you have a better chance of approval with them than much of the competition barring you don't have a standing relationship with a credit union of other personal advantage.
Finally, these loans are available for durations up to 60 months (5 years), which may be advantageous for those looking to legitimately finance a purchase and not only build their score.
#3 Pick
BankPlus
Best in Mississippi, Louisiana & Alabama
Est. APR (%): 5.07
Avg. Principal ($): 750
Avg. Duration (mnths): 18
Credit Check: Hard Inquiry
BankPlus is the only multi-state unsecured option we know of. It's only available in Mississippi, Louisiana & Alabama, so if you're outside these states you'll need to lean on options 1 & 2 or another below.
If you're eligible, it's important to note this is a two-loan program and not a single product. Depending on your progress, you'll receive a $500 and subsequent $1,000 loan, half of which is provided up front.
#4 Pick
Holy Rosary Credit Union
Best in New Hampshire & Maine
Est. APR (%): 8.25
Avg. Principal ($): 500
Avg. Duration (mnths): 12
Credit Check: Hard Inquiry
If you have connections to select counties in New Hampshire or Maine, Holy Rosary's offer may be a good choice. Like BankPlus, it's not a single product but a "Credit Builder Program" that offers $500 in principal up front when you deposit $250 in savings. You repay the loan over 12 months at a (very) low interest of just 8.25%. Most personal loans are 10% or greater.
The real kicker is that Holy Rosary throws in a $1,000 credit card to improve credit mix. We like this approach because it demonstrates a strong understanding of the building process, packaged in a way that's easy for consumers to understand.
#5 Pick
DC Credit Union
Best in the Capital (Washington D.C.)
Est. APR (%): 8.99
Avg. Principal ($):
Avg. Duration (mnths): 12
Credit Check: No Credit Check
Called a "Second Chance Credit Rebuilder," the offer is either a card or a loan for $2,500 that you'll use in tandem with a coach. You can request the loan if you're certain it's the right approach.
The catch is you must have already borrowed with DC Credit Union. We think a smart way to work around this is to obtain a secured credit card (see here), then apply for the loan.
#6 Pick
Centra Credit Union
Best in Indiana & Kentucky
Est. APR (%): 12.99
Avg. Principal ($): 3000
Avg. Duration (mnths): 18
Credit Check: No Credit Check
If you're in Indiana or Kentucky, Centra Credit Union offers a hefty $5,000 in principal for term lengths between 18 and 30 months, and up to $2,500 for durations up to 18 months. You can even choose a duration as short as 6 months. Centra will run a hard inquiry and requires 6 months of employment history.
The downside is an above-average APR of 12.99% and a $35 processing fee. It's among the least expensive for unsecured types, although the national average for payment-secured and fully-secured loans is 7.78% APR.
#7 Pick
Common Wealth One
Best in Virginia
Est. APR (%): 16.24
Avg. Principal ($): 1000
Avg. Duration (mnths): 18
Credit Check: No Credit Check
CommonWealthONE credit union takes an aggressive stance on providing a competitive offer: $1,000 in principal repayable over 12 months.
The downsides are a requirement of $500 in regular deposits over a 90 day period, which means you need to become a member and wait three months before beginning. There's also a hefty 16%+ APR on the loan due to the short duration and absence of a credit check.
Also, it's only available in Alexandria, Harrisonburg cities as well as Warren & Clark counties in Virginia, as well as the entire Washington D.C. area. You can also work in any of these areas, which means any of the city's 78% cross-border commuters are eligible.
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 $500 and $3,000, with the most desirable
quantity as $1,000.
Exceptions to these ranges are made for the
most important loan variable: interest. This list has no conflicts
between low loan APR and ideal principal + duration ranges, with the
exception of CommonWealthONE. It is included to
accommodate borrowers in Virginia and in Washington D.C.
Most
importantly, the deciding factor for this article is the availability of funds up front, otherwise known as unsecured credit-builders.
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.
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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