{"id":463377,"date":"2022-09-06T21:41:05","date_gmt":"2022-09-06T20:41:05","guid":{"rendered":"https:\/\/www.finder.com\/uk\/?p=463377"},"modified":"2026-05-11T02:26:51","modified_gmt":"2026-05-11T01:26:51","slug":"credit-builder-loans","status":"publish","type":"post","link":"https:\/\/www.finder.com\/uk\/personal-loans\/credit-builder-loans","title":{"rendered":"Credit builder loans explained"},"content":{"rendered":"
Late repayments can cause you serious money problems. See our debt help<\/a> guides.<\/div><\/article>

Getting accepted for credit cards and loans won\u2019t be easy if you have poor credit. Lenders are more likely to turn you away, or if you\u2019re accepted, you\u2019ll usually be offered a higher interest rate compared to someone with good credit. <\/p>

Fortunately, credit builder loans offer a solution for those with poor credit \u2013 used responsibly, they can help you to improve your credit score and get accepted for better deals in the future.<\/p>

What is a credit builder loan?<\/h3>

A credit builder loan is a loan designed to help those with low credit scores or a lack of credit history rebuild their creditworthiness. Provided you make all your repayments in full and on time, you can prove to lenders that you are responsible with credit, and your credit score should improve over time. <\/p>

A credit builder loan typically lets you borrow between \u00a3100 and \u00a35,000, which is less than a conventional personal loan. However, the amount you can borrow depends on the provider. You can usually find credit builder loans through online lenders or credit unions – high street banks usually won’t offer them. <\/p>

How do credit builder loans work?<\/h3>

With a credit builder loan, you agree to borrow a set amount of money and repay it in fixed monthly instalments over a set term \u2013 usually around 12 months. However, unlike conventional loans, you won\u2019t always have access to these funds straight away. Instead, you\u2019ll get access once you\u2019ve made all your repayments and reached the term’s end.<\/p>

As you make your repayments each month, your provider reports these to credit reference agencies (Experian, Equifax and TransUnion), and you should start to see an improvement in your credit score after a few months. Repaying the full amount on time will help demonstrate to other lenders that you\u2019re a responsible borrower, and you could get access to better rates in the future.<\/p>

However, keep in mind that should you miss a repayment, this is also reported to the credit reference agencies, which would harm your credit score.<\/p>

Pros and cons of credit builder loans<\/h3>
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Pros<\/h4>\n