Build your credit history without getting a credit card.
We know that everyone's situation is unique and we aim to help you find the right product for you. We may receive compensation when you visit our partners' sites or are approved for their products. You can read more about how we maintain editorial independence and how we make money here.The cycle of needing credit to build credit can be a frustrating one. Especially when you’ve had a financial stumble from something out of your control or you’re just starting out. A secured credit card may be an option, but there can be a good deal of fees associated with them.
You have another option: Credit builder accounts have been around for quite a while, and Self Lender has one that could be right for you.
- No credit score required
- Build positive payment history
- Check your credit score and get free credit monitoring
- Build — or rebuild — your credit
- Equal monthly payment
- Establish some savings
- The APY is very small
- No funds access for 12 months
What's in this Self Lender review?Jump to…
What is a Self Lender credit builder account?
Credit builder accounts — also called savings-secured installment loans — are secured by virtue of how they’re set up. The entire value of the loan is in a certificate of deposit (CD), which can be taken by the lender if you default.
Through Self Lender you can take a loan out for $550, $1,100 or $2,200 from Austin Capital Bank. The funds from the loan are then held in a CD that earns 0.10% APY for 12 months.
What’s probably best about this loan is that you don’t have to meet a minimum credit score requirement. The loan being completely secured greatly reduces any risk to the lender, thus relieving some of the requirements other providers or loan types carry.
- Choose to hold your funds in a 12-month or 24-month CD, depending on the account value you choose.
- You can earn an APY of 0.10% on the amount in the CD.
- Your consistent monthly repayments are reported to the three main credit bureaus: Experian, Equifax and TransUnion.
- Repayments made on time and in full can positively affect your credit score.
- There’s only one upfront fee of $9 to $15, depending on the account you choose to open.
- You won’t be hit with prepayment fees should you find yourself able to pay off your loan early.
What makes Self Lender unique?
A Self Lender credit builder account isn’t a loan in the typical sense. Usually when you take out a loan you get the funds, spend them and then repay the loan.
With Self Lender you take out a loan with a banking partner and your funds are held in an FDIC-insured CD for 12 or 24 months, depending on the account value you choose. You make 12 equal payments over the course of your repayment term, and the partner reports your payment history to the three major credit bureaus each month. Once you’ve paid off the loan, the funds in your CD will have matured — with earned interest.
When you use a credit builder account, you can establish a payment history. Keeping up on your payments and making them in full can help bolster your credit score.
How much does Self Lender cost?
It’s free to join Self Lender. When you establish your credit builder account, the following rates and fees will apply:
- Interest rate: 10.57% on the loan amount with a maximum APR of 15.65%
- Administrative fee: Nonrefundable $9 to $15, depending on your account value
If you miss a payment by more than 15 days, you’ll be charged a late fee of 5% of the monthly payment due.
How does Self Lender compare to a secured credit card for building credit?
One key difference is the requirement of an upfront deposit. Secured credit cards require you to provide cash upfront to secure the credit limit on the card.
Summary of the main differences between Self Lender and a secured credit card
|Self Lender||Secured credit card|
|Upfront deposit requirement||None||Total amount of credit limit, usually $200 to $500|
|Access to funds||No access until after 12 or 24 month of payments, depending on your account’s value||Ongoing access to credit limit|
|Credit reporting||Reports to the three major credit bureaus as an installment loan||Reports to the three major bureaus as a revolving line of credit|
|Cost||APR of up to 15.65%||APRs start at 9.99% but can be as high as 24.99%|
What are the benefits of a Self Lender credit builder account?
- Build — or rebuild — your credit. These accounts are intended to do exactly what they say: help you build your credit. To successfully do so, you’ll need to make timely, in-full payments every month. A good payment history isn’t the only thing that makes up a credit score, so it could help to read more about how to build your credit.
- Refer a friend. When you start your account with Self Lender, you’re assigned a unique referral link. Should your friends or family create an account through that URL, you receive $10 after they make their first payment toward a loan.
- Equal monthly payments. There’s no need to worry about variable payments. Installment loans come in equal, predetermined amounts spread over a set schedule.
- Establish some savings. The money in the CD is yours after 12 months or 24 months of successful savings, depending on your account’s value. That means having anywhere from $525 after 24 months to $2,200 after 12 months, plus any interest that’s accrued with the 0.10% APY.
What is the difference between an interest rate and an APY?
Your interest rate is the simple interest you’re paid on an account or an investment over the period of a year. For example, if you’ve invested $1,000 into an account that comes with 1% interest, you’ll have earned $10 on that investment at the end of a year.
The annual percentage yield is a bit trickier. An APY is an effective annual rate of return that takes into account the effect of compounding interest over a year. In short, it’s the interest rate compounded monthly over the course of a year. Learn more about savings accounts.
What to watch out for
CD-secured installment loans like Self Lender can help build your credit score as they advertise, but they affect more than one part of your score. The amount that you save with the CD is also less than what you’re paying in interest on the loan, so it’ll cost you in the end.
Here are a few things to keep in mind before applying for an account:
- Open accounts affect your credit score. Payment history makes up 35% of your FICO score, but other factors are affected by opening a new account. How much you owe versus how much open credit you have also makes up 30%, while new accounts and credit inquiries make up 10%. It may be worth considering the impact that closing your account after the loan is up will have on your score.
- No simultaneous accounts. While you can take out another loan after your first is up, you can’t have two open at the same time with Self Lender. If you’re hoping to make more payments per month or save more, you may need to look for alternatives.
- The APY is very small. Though it’s marketed as a way to save money, it’s important to look at just how much you’re saving. For a $2,200 “deposit,” you’ll pay $194 per month — which means you’ll pay $2,328 over the life of the loan. The expected value of your CD on release is $2,202.20 — thus you will have paid $125.80 more than what you’ll withdraw in the end.
- No funds access for 12 months. This type of loan renders the funds inaccessible for 12 months — or until you pay the loan off completely. You won’t be able to access what’s in the CD, and you won’t have any way of pulling from what you’ve paid into it. If you think you’ll have issues making monthly repayments, you may want to consider another option.
Am I eligible to apply with Self Lender?
If you’re ready to start building your credit and saving with Self Lender, you’ll need to:
- Be at least 18 years old.
- Have a valid Social Security number.
- Have a valid email address, residential address and phone number.
- Have a bank account or debit card that’s in your name.
Is applying for a loan through Self Lender safe?
Yes. Applying for a Self Lender credit builder account is safe.
Self Lender uses multiple encryption levels to secure your information, including 256-bit Secure Sockets Layer. On top of the encryption, Self Lender regularly tests and scans its security systems to prevent hacking.
As far as accreditations, Self Lender is an FDIC member and has a B rating with the Better Business Bureau.
How do I apply?
Now that you’ve checked your eligibility, there are just a few steps to apply:
1. Visit Self Lender’s website.
2. Click Get started.
3. Select “I want to build credit and savings.”
4. Enter your contact information to create an account.
5. Complete the required form.
6. Submit your application.
The entire process usually doesn’t take more than five minutes.
I got the credit builder account with Self Lender. Now what?
You’re on the way to better financial health, and that’s a big deal. You can log in to your Self Lender account to make one-time payments at any point. If you miss a payment by more than 15 days, the late fee is 5% of the monthly installment. You could set up automatic payments: If you’re sure you can have the payment amount in your bank account every month on the same day, autopay can save you from missing a payment.
Building and rebuilding credit can be a strenuous experience. Self Lender’s credit builder account may be able to ease some of that with a simple system and straightforward repayments.
Credit builder loans aren’t the only way of building credit though. Compare other options for improving your credit score to find what will best fit your needs.