This post is brought to you by Self Lender. While this post was sponsored by Self Lender, all content and opinions expressed here are my own.
PT’s note: I first heard about Self Lender when a close friend asked me, “hey, is Self Lender legit?” His wife wanted to start improving her credit and wanted to know if Self Lender was a good option. It’s definitely a novel concept and has that too-good-to-be-true feel. As it turns out, they are legit (I’ve met their team in person) and so we decided to give them the full review treatment today. Here’s Emily…
Building up your credit rating can feel like an impossible chicken-or-egg scenario. Right? Without a proven credit history, lenders and banks are hesitant to extend credit to you—but without credit extended to you, you can’t build a proven credit history.
The classic advice for skirting this credit Catch-22 is to apply for a secured credit card. These cards require a deposit up front that will be used as collateral in case of default—which means folks with poor (or non-existent) credit can use them to improve their scores.
While secured credit cards can be a good way for you to beef up your credit rating, they aren’t for everyone. Some folks don’t want cards in their life. And a secured credit card requires a big, upfront deposit.
This is where Self Lender comes in. With Self Lender, you can apply for a credit builder Certificate of Deposit (CD) account to help you improve your credit history and provide you with a savings vehicle at the same time.
Here’s what you need to know about how Self Lender works and whether it will be a good fit for improving your credit score:
The Self Lender Credit Builder Account
While Self Lender offers resources that you can use to monitor your credit score and credit history, their credit builder account is the centerpiece of the platform.
This account—which Self Lender offers through one of its two bank partners, Lead Bank and City National Bank of New Jersey—is a CD-secured installment loan.
That means the FDIC-insured CD provides collateral against your loan, so the qualifying criteria are much less rigorous than what you’d find with unsecured credit cards or traditional personal loans.
No credit history is required and the loan requires no hard pull, so the Self Lender account cannot hurt your score.
Once you’ve been approved for a credit builder account, you are issued a small loan that is held in the CD until you repay it. Each plan also includes credit monitoring.
Credit builder accounts from Self Lender come in four possible loan amounts ($525, $545, $1,000, and $1,700) offered with either 12- or 24- month terms. You open the account with a small non-refundable activation fee of between $9 and $15, and then you make equal monthly payments for the duration of the term. At the end of the term, you receive the original amount of the loan, plus interest earned by the CD.
Credit Builder Account Options
| Loan Amount | Monthly Payment | Term | Activation Fee | APR | Total Cost to You | What You Get At End of Term |
|---|---|---|---|---|---|---|
| $525 | $25 | 24 months | $9 | 14.92% | $609 | $525 + CD interest |
| $545 | $48 | 12 months | $15 | 15.65% | $591 | $545 + CD interest |
| $1000 | $89 | 12 months | $12 | 14.62% | $1080 | $1000 + CD interest |
| $1700 | $150 | 12 months | $12 | 12.03% | $1812 | $1700 + CD interest |
While you are in the midst of repayment, your on-time payment history is reported to the three credit bureaus, which helps to improve your credit score. As Self Lender itself reports on its site, payment history accounts for 35% of your credit score, the single largest factor in credit calculations.
Once you have paid off the loan, the CD matures and unlocks with earned interest, which means you’ve built your credit and your savings at the same time.
Related: Improve Your Credit Score with Our Ultimate Guide to Credit
Self Lender Conditions and Fees
The credit builder account is now available in ALL 50 STATES, which means everyone across our nation has a chance to use this helpful tool.
It’s important to remember that the credit builder account is not free. Assuming everything goes without a hitch with your credit builder account, you will pay an APR of between 12.03% and 15.65% for your loan (better than most credit cards). This APR includes the non-refundable activation fee and the interest rate you pay. There are also additional fees and conditions to be aware of.
First, a payment that is over 15 days late will incur a late fee of 5% of the payment due. Self Lender describes this as a “one-time fee,” which means there is only one late fee per month. But you could potentially pay this late fee multiple times if you are regularly more than 15 days late in making your monthly payment.
If you are more than 30 days late in making a monthly payment, it will be reported as a late payment to the credit bureaus—defeating the very purpose of the account. There is an automatic payment feature, however, which can help you to avoid late payments.
Credit builder account holders who default will have the default reported to the credit bureaus, and the account will be closed. The funds in the account will be returned once the remaining loan principal, interest, and fees have been paid.
Is Self Lender Right For You?
According to credit expert Jason Steele, “this program definitely has a place for people who want a financial vehicle to build credit, but don’t want or need a credit card. Clearly, many credit card users overspend and incur debt, which isn’t a factor with Self Lender.”
The fact that borrowers also end up with a large windfall of cash once the term is complete is also a big potential benefit, depending on your money psychology. If you are the sort of person who has trouble keeping track of small amounts of money, but you are pretty responsible with big sums (like your annual tax refund, for instance), then a Self Lender credit builder account could be a great fit.
However, Steele points out that there are some drawbacks to the credit builder account:
“There’s the $9-$15 to open an account, as well as the fact that your 12 or 24 monthly payments will add up to more than the CD you are receiving. For example, you can make 12 $150 payments for a total of $1,800 to receive a CD of $1,700, so you are paying $100 more than you will eventually receive.”
If you are capable of responsible spending with a secured credit card with no annual fee, then Steele recommends that option in addition to Self Lender. A secured card is free to any user who pays off the card each month and can afford the initial deposit.
Any person who just doesn’t want to deal with card spending, however, will be better served with just a Self Lender credit builder account, as it takes the temptation of spending off the table, and provides a nice savings windfall at the end of the term.
The Bottom Line
The Self Lender credit builder account is not going to be the right product for everyone looking to improve their credit rating. However, for the individuals who don’t want to bother with a credit card and who want to build better credit, better financial habits, and a nice little nest egg at the same, Self Lender’s credit builder account is an excellent option.
The good news: you can do both! Many folks end up with a secured card (revolving credit) and a loan from Self Lender (installment credit) to fast-track their credit repair.
Get started with Self Lender today!
