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When you have bad credit, life feels like one long uphill battle. You’re in a constant state of stress, balancing debts, bills, and interest rates that are spiraling out of control. But there are solutions, and Self Lender has positioned itself as one of them.
The question is, can Self Lender really help you out of debt and can it improve your financial situation?
What is Self Lender?
According to co-founder James Garvey, Self Lender was established to help people create a credit history for the first time. It is an online-only service that provides residents in all 50 states with a loan specifically designed to build credit.
In fact, thanks to their credit monitoring, you don’t even have to take out a loan to benefit from the services offered by Self Lender.
Self Lender Review
We have reviewed a lot of credit building services on DebtReviews but would only recommend a small number of them. In the past we have been relatively neutral with regards to secured credit cards and credit repair agencies, but we really like what Self Lender have created here and think they could be onto something
The APR can be high, but only as high as the average rewards credit card. And it’s important to remember that this is not a typical loan and the goal is not to get a cash sum, but to build your credit. If you take out a loan of $500 over the course of 12 months with monthly repayments of $48 then you will pay a total of $591 (including the full $15 admin fee). At the end of the 12 months you will then get $545 back.
This means that you’ve spent just $46, and in return you’ve given your credit score a considerable boost, getting the respect you need from lenders to get an unsecured credit card or to build towards a loan or mortgage.
This is a fantastic option for anyone struggling to build a respectable credit score, because if you can afford a $15 upfront fee and $25 a month, then you have all you need to start building towards your future.
How Does Self Lender Work?
- Join: The first step is to signup, which you can do free or charge regardless of how good, bad, or non-existent your credit score is. You will be able to view your credit score when you signup and it will remain on your account so that you can monitor any changes.
- Apply: You can then apply for a credit builder loan, which is exactly what it sounds like. You are given a loan agreement and the loan amount is then deposited into your Self Lender account, secured by the Federal Deposit Insurance Corp.
- Repay: You make monthly repayments towards the loan amount and when these repayments have been made in full the loan will be released.
- Build: At the end of this process you will have built your credit history, proving to lenders that you can make repayments sensibly and on time.
What’s the Point of Self Lender?
You may be asking yourself, “What’s the point of a loan that you don’t get until you’ve paid it off?”. The key thing to remember here is that the loan is not the most important part of the process, the repayments are.
Think of it like a secured credit card. With one of these credit cards you basically give the card company an amount of money and then this money becomes your credit limit. You’re essentially handing it over to them for safe-keeping, before taking small amounts back whenever you need it.
The difference is that a Self Lender loan is more accessible to many debtors as it does not require you to make a sizable deposit. As good as secured credit cards are, this requirement rules many debtors out. Self Lender loans (AKA credit builder loans) offer the same credit building benefits, but without that initial outlay.
How Does Self Lender Work?
Once you are approved for a Self Lender loan then the agreed-upon amount will be deposited into one of their partner banks. You first need to choose how much you want to pay every month, with the lowest amount being $25 for a two-year term. You can also opt for a repayment of $48, $89 or $150, with a total repayment term of just 12 months.
Self Lender loans charge an annual percentage rate of a maximum of 16% and you will also be required to pay an admin fee of up to $15 (depending on which payment method you choose).
Your money will also be earning interest over time. This interest will not come close to offsetting the APR, but it helps to reduce the amount and ensures you get out a little more money than you put in at the end of the repayment period.
Here are some key takeaways regarding the Self Lender service:
- A larger loan will accrue less interest over the course of the loan, but it will not help you to build your score any faster.
- A late payment will negatively impact on your credit score, so make sure you choose a monthly repayment that you can afford without issue.
- Late payments (15 days or more) will incur a charge of 5% of the monthly repayment amount. If it is still not paid off, the account will be defaulted.
- You can choose to continue making those monthly payments after the end of the term, with Self Lender offering to add them to a savings account with a partner bank.
- You can keep an eye on your credit score throughout the repayment period.
- They report to all three major credit bureaus, which means your score could improve very quickly and you will be given a FICO score if you do not already have one.
What Happens if You Close Your Account?
If you can no longer make the monthly repayments then you can close your Self Lender account and gain access to the money in the Certificate of Deposit, minus the money that you still owe. If you miss a payment, as mentioned above, this will hurt your score and if you’re only just starting out this is bad news.
How to Signup to Self Lender
There are only a few basic requirements to get a Self Lender account and start applying for your credit building loan. These include:
- You need to be at least 18 years old and it doesn’t matter if you have a credit score already or not.
- You need to be a permanent resident in the United States of America.
- You must have a Social Security number, which they will need during the loan application.
- You need a bank or a card, but you can use a reloadable card if you do not have a debit or credit card.
And that’s pretty much it. There is no catch, there is nothing negative here. Even if you look at the bigger picture and forget about those small monthly repayments, then you’re only paying a very small fee to basically have someone beef-up your credit score. It’s cheap, it’s effective, it doesn’t feel like it is costing you anything and it’s a lot cheaper than any other method.