How credit builder loans work
A credit builder loan is designed to help you build a credit history by making regular, on-time payments that are reported to credit reference agencies.
With many credit builder loans, the money is held in a savings account and released to you once you've made all the payments. Others pay you the money upfront. Check how your provider works.
Worked example
A £500 credit builder loan at 15% over 6 months costs £87.02 a month, £522.10 in total.
Interest is worked out monthly at one twelfth of the annual rate. Lenders may calculate interest differently (some charge it daily), so your actual payments can differ slightly.
Making it work for you
Only take one if you can make every payment on time. Late or missed payments are reported too and can harm your credit record.
Inputs for the 6 month credit builder loan calculator
Amount to borrow
The loan amount.
Interest rate (per year)
The annual interest rate on your loan. The rate shown is only an example, so enter the rate from your quote.
Term
How many months you'll repay over. Credit builder loans are often short, such as 6 or 12 months.
CALCULATOR QUESTIONS
6-month credit builder loan calculator questions
Do credit builder loans improve your credit score?
Regular on-time payments can help build a positive credit history. Missed payments do the opposite.
Do I get the money straight away?
Not always. Many hold the money until you've made all the payments. Check your provider's terms.
How long is a credit builder loan?
Often short, such as 6 or 12 months.
Is there a cost?
Usually some interest or fees. The calculator shows the interest for the rate you enter.