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What is a credit builder loan?

Do you have bad credit or no credit at all? A credit builder loan is a unique option that allows you to borrow money and save — at the same time.


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credit builder loan

Lenders rely on your credit score to determine if you’ll pay back your debt on time, and your damaged credit history (or no credit history at all) can narrow your options and make approval difficult. If you have bad or no credit, consider a credit builder loan — a little-known tool designed to establish or boost your credit score. As long as you budget well and make your repayments on time, this can be an easy, hassle-free way to build a credit history.

But beware: As helpful as these loans may sound, they usually come with high interest rates and fees. Review your loan’s terms and conditions — including the loan’s total cost — before you sign a contract.

Refresh Financial Credit Builder Loan

Refresh Financial Credit Builder Loan


19.99 % APR


  • Build up your credit score
  • Competitive interest rates
  • High maximum borrowing limit

Refresh Financial Credit Builder Loan

Apply today for a credit builder loan and work towards improving your financial health. Refresh Financial do not provide loan funds upfront. Instead, funds are placed into a secured account to be accessed for later use.

  • APR: 19.99%
  • Loan amounts: $1,250-$25,000
  • Loan terms: 3-5 years
  • Fees: No administration or origination fees.
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Get your credit score or rebuild your credit

Name Product Interest Rate Max. Loan Amount Loan Term Fees Min. Credit Score Link
Refresh Financial Credit Builder Loan
3-5 years
No administration or origination fees.
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More Info
No funds are provided by Refresh upfront. Instead, funds are placed into a secured account to be accessed later. Your payments are reported to the credit bureaus, potentially impacting your credit score.
Marble Fast-Track Loan
19.44% – 31.90%
36-84 months
Legal and admin fees of $295 - $1,500 (based on size of loan)
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More Info
Marble Financial offer credit builder loans in amounts from $5,000 to $20,000. Improve your financial health within 36 months. This loan is strictly for borrowers exiting a consumer proposal.

Compare up to 4 providers

Name Product Price per month Credit scores Credit monitoring Credit reports Update frequency
Marble Financial Score-Up
TransUnion, Equifax
TransUnion, Equifax
Score-Up uses software to help you build or rebuild your credit score. Set targets, access your credit score anytime, monitor your progress and find out what actions you should take to increase your score as quickly as possible.

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Name Product Starting price Trial period Price per month Credit scores Credit monitoring Credit reports Update frequency
Credit Verify Credit Score
7 days
Instantly access your credit score and report online and get daily alerts and updates. Plus, premium members get $25 in bonus rewards every month which can be used towards discounts on everything from shopping and entertainment to dining and travel.
Mogo Credit Score
Open a MogoAccount and access your credit score for free with no impact to your score. Receive your updated Equifax credit score every month.

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What is a credit builder loan?

A credit builder loan is a loan that helps you build or rebuild your credit score. With a credit builder loan, your loan money is put into an account that you can’t access until you finish paying off the loan in full. It sounds strange at first, but think of it as a loan layaway. Once your loan is paid in full, you end up with an improved credit score, because you’ve responsibly made repayments over the course of a few months or years. In addition, you’ll have set aside cash in a savings account to use however you wish.

Unlike secured credit cards, credit builder loans don’t require a deposit — which means you don’t already need savings or collateral to get one. Since they’re designed to help people improve their credit, your payments are reported to the two credit bureaus: Equifax and TransUnion.

Here are some typical features of a credit builder loan:

  • Usually offered by credit unions, small banks and online lenders.
  • Borrow small amounts, usually from $500 to $5,000.
  • Designed for people who have bad credit, minimal credit or no credit at all.
  • Generally have high interest rates and fees.
  • Are unsecured.

Other names for credit builder loans:

  • Fresh start loans
  • Savings loans
  • Secured installment loans

Compare where you can get a loan to build credit

Credit builder loans aren’t the most common way to build or rebuild credit, so it can be difficult to find multiple lenders offering them. You can usually find a credit builder loan at:

  • Local banks. Most of the big banks don’t offer credit builder loans, preferring that you opt for a credit card instead. However, you might find a personal loan with a local bank that secures your funds in an account until the end of your loan term. At this point, you can withdraw the amount you’ve saved or keep it as a nest egg — whichever makes the most financial sense for your situation.
  • Credit unions. A credit union is a nonprofit that offers many of the same services you’ll find at a traditional bank, however they’ll usually offer a few extra services — including credit builder loans. The money you borrow is kept in an account until the end of a term ranging anywhere from a few months to a couple of years. Interest rates may be lower than with other unsecured loans, and many credit unions place your loan in a savings account, where it could earn a little extra interest.
  • Online lenders. Online lenders can help you rebuild your credit without leaving your house. Lenders like Refresh Financial offer credit builder loans, also known as savings loans, with terms ranging from 3 to 5 years. Low interest rates are offered, however there are fees on top of the rates.

Benefits and drawbacks


  • End with a nest egg. Since you can’t access your funds until the loan matures, you end up with a decent chunk of savings that you can access. If a financial emergency arises, you can use these savings to cover it — instead of taking out another loan.
  • Earn interest on your loan. If your loan is locked in a savings account, you could possibly earn interest while you make your monthly repayments. Interest won’t be enough to offset the overall cost of your loan, but it reduces the total amount you’ll end up paying and gives you a little bit more once your loan has matured.
  • Easy repayment schedule. Nearly all credit builder loans stretch out monthly repayments over a few years. Since the amount you borrow is usually low, so are your repayments — meaning you should be able to budget wisely to keep up with them.


  • You can’t access your money. Your money is locked away until you pay off the loan. If you need money right away, a credit builder loan is not a good option.
  • Limited availability. Many banks don’t offer this form of credit, most credit unions require you to hold an account with them for a few months before they consider you eligible and few online lenders offer credit builder loans. Your choices for credit builder loans in Canada are slim.
  • Small loan amounts. Credit builder loans aren’t designed to finance big purchases like cars or home renovations. Expect to borrow a small amount, usually between $500 to $3,000. With that said, some lenders may offer amounts up to $10,000, however you’ll need to pay off this amount over a longer period of time.

What other options do I have to borrow money if I have bad or no credit?

If you can’t afford to wait for your credit builder loan to mature, you have alternatives that can get you funds within a few days. Keep in mind these options vary widely in terms of features, eligibility and interest rates.

  • Secured credit cards. Functioning like your typical credit card, secured cards come with low credit limits — usually up to $500 —which is paid by you before you begin swiping. Your deposit acts as collateral, and you can build or rebuild your credit with a secured card as you pay off your purchases in a timely manner.
  • Short-term loans. Commonly known as payday loans, you can get access to small amounts of money to get over a financial hump. Known for their excruciatingly high interest rates, payday loans can be handy if you need a small amount of money for a short period of time.
  • Installment loans. If you want to borrow more than a few hundred dollars and need cash quickly, an online installment loan could be an option to consider. These loans usually come with more competitive rates than payday loans, and are typically paid off over a longer period of time.
  • Bad credit personal loans. Unlike a standard personal loan, these lenders look beyond your credit history to your income and financial status when determining whether you can afford repayments. You can usually access both installment loans and single payment loans, and borrow money with or without collateral.

Like other forms of credit, these options require you to pay back your debts on time through monthly, bi-weekly or weekly repayments. If you make a late payment or miss one, it can negatively affect your score. Make sure you can afford to take on extra debt before you agree to a loan, otherwise you could find yourself in a worse financial state than when you began.

Bottom line

Among the many options you have when looking to rebuild your credit score, a credit builder loan is one to be considered. While they’re easy to apply for, be wary of pricy fees and high interest rates. Before you make your final decision, look into other loan options that might be a better fit for your needs.
Start repairing your credit today

Frequently asked questions

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