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Senior Contributor
txjohn
Posts: 4,214
Registered: ‎09-12-2008

Credit Builder Loans: You can get a 'secured' personal loan without any savings

[ Edited ]

It appears that not everyone understands one of the "secured" loan options available for "building' credit.  So, I am providing the following basic info:

 

Types of secured credit:

 

1.  Secured Credit Card:  You place money into savings, you will be issued a credit card equal to the savings amount and the savings will be "held" as collateral.

 

2.  Secured Personal Loan:  Similar to the secured credit card, but is an installment loan (good for mix).

 

3.  Credit Builder Loan:  This is a secured personal loan BUT you don't need to have any savings to establish it.  The Credit Union loans you the money for savings.  So, you may borrow, for example $500 up to $2500, which will be placed into your savings or CD account and held as collateral.  You then pay a nominal interest rate on the intallment loan....but at the end of the loan you have the orginal loan amount in savings, a successfully paid loan history with the CU and tradeline on your CR.

 

Here are a couple links to CU's that advertise the program as I described (but not all advertise it, so ask yours to be sure if they do or do not).  Others may offer it, you just have to check.  Some who do not regulary offer it may be willing to execute a builder loan if you ask.  This list does not represent any recommendations, just to serve as an example of the builder loan and the wide spread nature of them:

 

http://www.mitfcu.org/home/loans/credit

http://www.prairietrailcu.org/asp/products/product_5_4.asp

https://www.freedomfirstcu.com/credit-rebuild.html 

http://www.denvercommunity.coop/DCFCU_loans_credit_builder.html

http://www.mazuma.org/services/credbuilder.htm

https://www.parkfcu.org/loans/other-loans.htm

http://www.langleyfcu.org/personal/financial-assistance/credit-builder.html

https://www.baptistcu.org/loans/

https://www.nevadafederal.org/loans/personal.aspx

http://www.nuestro-banco.com/creditbuilder.htm

Message Edited by txjohn on 04-18-2009 04:20 PM

Credit Scoring 101 - Tuscani   *  Guide to Common Abbreviations
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09/03/2009 TU: 777, EQ: 776 ($8 balance on an account dropped me out of 780's)
03/28/2009 TU: 814, EQ: 810, EX: 781 (02/12/2009)
05/18/2005 TU: 563, EQ: 580, EX: 549
Valued Contributor
jmbfl
Posts: 1,185
Registered: ‎03-04-2008

Re: Credit Builder Loans: You can get a 'secured' personal loan without any savings

If you really want to examine the matter you can look here:

 

Credit Builders Alliance:

http://www.creditbuildersalliance.org/

 

and specifically here:

http://www.creditbuildersalliance.org/toolkit-innovations/credit-builder-loans.html

 

There is also some real "don't touch with a ten foot pole" lending discussed here:

http://www.creditbuildersalliance.org/toolkit-hot-topics/small-dollar-and-payday-loans.html

 

 

 

Senior Contributor
txjohn
Posts: 4,214
Registered: ‎09-12-2008

Re: Credit Builder Loans: You can get a 'secured' personal loan without any savings

[ Edited ]

Good post jmbfl - 

 

For clarification:  the third article/link jm posted is not about problems with credit builder programs, it is about predatory and payday lending which credit builder loans were designed to in part combat those lending practices. 

 

jm - i just wanted to clarify this point in case somebody sees your heading, but fails to read the article and might assume that the credit builder loan program is the "don't touch" topic.

 

:smileyhappy:

Message Edited by txjohn on 04-19-2009 06:01 AM

Credit Scoring 101 - Tuscani   *  Guide to Common Abbreviations
Frequently Requested Threads * FICO High Achievers  *  FICO Score Estimator


09/03/2009 TU: 777, EQ: 776 ($8 balance on an account dropped me out of 780's)
03/28/2009 TU: 814, EQ: 810, EX: 781 (02/12/2009)
05/18/2005 TU: 563, EQ: 580, EX: 549
Frequent Contributor
Mank
Posts: 414
Registered: ‎11-30-2008

Re: Credit Builder Loans: You can get a 'secured' personal loan without any savings

TX, as you are the authority on Alliant, do you know off the top of your head if they do these rebuilder loans? I'm guessing not, since you didn't put it on your list?

Senior Contributor
txjohn
Posts: 4,214
Registered: ‎09-12-2008

Re: Credit Builder Loans: You can get a 'secured' personal loan without any savings

Mank -

 

I'm not sure that I am the authority, but I did think you had a good question.  So, I called and spoke to 'Nick' in the loan department and asked him.

 

Currently Alliant does not offer a 'credit builder loan.'  They do offer share secured loans (you put the savings up first).

 

HOWEVER:  Nick said they are working on developing such a loan and plan to roll it out in the next 3 to 5 months.  He said that the motivation behind developing it at Alliant is the current economic climate and those who are interested in rebuilding credit and starting from "scratch."

 

So, if this timeline is accurate, you may be able to get a credit builder loan within the next 5 months at Alliant.  Maybe if some additional "input of interest" is sent to Alliant they may get it done on the 3 month side ???? :smileyhappy:

Credit Scoring 101 - Tuscani   *  Guide to Common Abbreviations
Frequently Requested Threads * FICO High Achievers  *  FICO Score Estimator


09/03/2009 TU: 777, EQ: 776 ($8 balance on an account dropped me out of 780's)
03/28/2009 TU: 814, EQ: 810, EX: 781 (02/12/2009)
05/18/2005 TU: 563, EQ: 580, EX: 549
Frequent Contributor
Mank
Posts: 414
Registered: ‎11-30-2008

Re: Credit Builder Loans: You can get a 'secured' personal loan without any savings

Thanks for going the extra mile to get me an answer on this! I've recently opened checking, savings and visa and happily found the local BECU ATM to work like a charm as far as accessing the acocunts goes. Dove in to see what the SO could get with his lower scores, and only came out with savings for him (although the free $5 is always nice!) I was thinking this would be the perfect thing for him to not only boost his rapidly increasing score, but it also sort of acts as forced savings. I'd never heard about it til reading your posts. Perhaps I'll give them a call to try to nudge them towards the 3 months side :smileyhappy:

 

Thanks again, you do great work here!

Senior Contributor
txjohn
Posts: 4,214
Registered: ‎09-12-2008

Re: Credit Builder Loans: You can get a 'secured' personal loan without any savings

[ Edited ]

If you want to work with Alliant, then here are some "Creative Work-around Credit Builder Loan methods"

1.  Use $500 from your monthly budget or borrowed from a close friend/family member to put into savings, then take out a secured personal loan for $500 against the savings, thus replacing the "borrowed from budget or friend" funds and then pay the loan off like a standard credit builder.  In the end, you have $500 in savings, a successful loan and only paid a little interest to get the tradeline and history.  The $500 out of budget will only be tied up for a few days to a week while the deposit and loan is processed.

 

2.  Use a cash advance from existing cc for the $500 deposit, take out th personal loan and repay the cc.  CC is back to $0 balance in about a week, $500 secured in savings, now just pay the loan off.  Be mindful that you will incur cash advance fees and interest from the day you take the cash till the day you pay it off on the cc.

 

These are merely creative ideas acting as food for thought for anybody who wanted to get started on a secured loan with Alliant but doesn't have $500 (or other amount) right now to tie up.  Remember, the amount you put into savings will be returned to you immediately from the loan.

 

 

Message Edited by txjohn on 04-20-2009 03:10 PM

Credit Scoring 101 - Tuscani   *  Guide to Common Abbreviations
Frequently Requested Threads * FICO High Achievers  *  FICO Score Estimator


09/03/2009 TU: 777, EQ: 776 ($8 balance on an account dropped me out of 780's)
03/28/2009 TU: 814, EQ: 810, EX: 781 (02/12/2009)
05/18/2005 TU: 563, EQ: 580, EX: 549
Senior Contributor
creditwherecreditisdue
Posts: 4,923
Registered: ‎04-19-2009

Re: Credit Builder Loans: You can get a 'secured' personal loan without any savings


txjohn wrote:

If you want to work with Alliant, then here are some "Creative Work-around Credit Builder Loan methods"

1.  Use $500 from your monthly budget or borrowed from a close friend/family member to put into savings, then take out a secured personal loan for $500 against the savings, thus replacing the "borrowed from budget or friend" funds and then pay the loan off like a standard credit builder.  In the end, you have $500 in savings, a successful loan and only paid a little interest to get the tradeline and history.  The $500 out of budget will only be tied up for a few days to a week while the deposit and loan is processed.

 

2.  Use a cash advance from existing cc for the $500 deposit, take out th personal loan and repay the cc.  CC is back to $0 balance in about a week, $500 secured in savings, now just pay the loan off.  Be mindful that you will incur cash advance fees and interest from the day you take the cash till the day you pay it off on the cc.

 

These are merely creative ideas acting as food for thought for anybody who wanted to get started on a secured loan with Alliant but doesn't have $500 (or other amount) right now to tie up.  Remember, the amount you put into savings will be returned to you immediately from the loan.

 

 

Message Edited by txjohn on 04-20-2009 03:10 PM

Please be aware of the fact that while most CC's offer the ability to take a cash advance against your card many of them also consider taking a cash advance a red flag for AA. Which CC's are they? Who knows. But several have posted here regarding the AA taken against them instantly after taking a cash advance. The only one I would even vaguely consider doing this with is BofA with one of their conveniece checks that is treated as a BT and not a cash advance. (If you have an open BT offer with BofA you know what they are.) Otherwise, steer clear. This could easily blow up on you.

Senior Contributor
txjohn
Posts: 4,214
Registered: ‎09-12-2008

Re: Credit Builder Loans: You can get a 'secured' personal loan without any savings

Cash advances may be something that is questionable on an individual basis.  Also, not all cards provide cash advance on the whole limit of card.  For example, a $1k card may only have  a $200 cash limit.

 

Again, these are "creative options" but must be carefully weighed and considered based upon each individuals circumstance.

 

My first recommendation would be 1.  put money in savings and leave, or 2.  temporarily use "budget" or short term friend loan which is immediately repaid from loan proceeds.

 

 

Credit Scoring 101 - Tuscani   *  Guide to Common Abbreviations
Frequently Requested Threads * FICO High Achievers  *  FICO Score Estimator


09/03/2009 TU: 777, EQ: 776 ($8 balance on an account dropped me out of 780's)
03/28/2009 TU: 814, EQ: 810, EX: 781 (02/12/2009)
05/18/2005 TU: 563, EQ: 580, EX: 549

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