Yes. Although credit-builder loans are easier to get than traditional loans, the lender will deny you if you don’t meet its minimum requirements.
What is a Credit-Builder Loan and Where Can You Get One?
Boost your credit and your savings
Updated on:
September 10, 2025
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What are credit-builder loans?
- A credit builder loan is a way to boost your credit score.
- You send money to a lender in monthly installments and get it all back at the end of the loan term.
- Credit-builder loans have fixed monthly payments until you hit your loan amount — usually $300 to $1,000.
- A credit-builder loan is best if you can easily afford the monthly payments and don’t already have debt.
Should you get a credit-builder loan?
Use our flowchart to decide if you should apply for a credit-builder loan or choose an alternative.
Intuit Credit Karma: Best overall credit-builder loan
Doesn’t charge interest
No specific terms
Starting at $500
None
Pros
- No fees or interest charges
- No credit check
- Doesn’t require monthly payments
- Reports to all three credit bureaus
Cons
- Savings account doesn’t earn interest
- If you don’t make monthly payments, you won’t see the same credit boost
- Must transfer money to the account at least once every three months
What to know
The best credit-building loan is the Credit Karma Credit Builder because it’s free and gives borrowers the flexibility to save as much and as frequently as they want.
Credit Builder doesn’t require monthly payments, and you can start with payments as small as $10. Each time you save up $500, Credit Karma will release $500 to you.
It may be tempting to skip monthly payments without facing a penalty, but you’ll build your credit much faster if you choose to make regular payments.
How to qualify
To get a Credit Builder loan with Credit Karma, you’ll need:
- A credit score of 619 or lower
- A Credit Karma Money Spend account
BMO: Best credit-builder loan from a bank
10.80% - 19.12%
24 to 60 months
Starting at $1,000
$75 loan processing fee
Pros
- Loan money earns interest
- Can qualify even with no or low credit
- Low, one-time fee
- Autopay discount
Cons
- Loans start at $1,000 (compared to $500 from competitors)
- High starting rates
What to know
If you’re a current BMO customer who can take advantage of the autopay interest rate discount, the BMO credit-builder loan is worth considering. When you take out a credit-builder loan with BMO, your money will go into a certificate of deposit (CD), where it will earn interest.
BMO credit-builder loans come with high annual percentage rates (APRs), meaning that you’ll have to pay more to take out the loan. While your loan will earn interest in a CD account, it likely won’t be enough to offset the cost of the interest payments you make.
How to qualify
BMO doesn’t have a minimum credit score requirement for the credit-builder loan. To evaluate your eligibility, BMO will review how you pay off any current debts and assess whether you can afford the monthly payment for your credit-builder loan.
DCU: Best credit-builder loan from a credit union
5.00%
12 to 24 months
$500 - $3,000
None listed
Pros
- Low APR
- Choose loan term and amount
- Loan funds earn interest
Cons
- Must become a member of DCU to get loan
- Charges interest
What to know
Digital Federal Credit Union (DCU) offers a low-cost credit-builder loan to its members. While you will need to pay a 5.00% APR, your money will earn interest in a savings account as you pay off your loan. This will help offset the (already competitively low) cost of your loan.
You will need to become a member of DCU to get a loan, but you can easily qualify by joining one of their partner organizations.
How to qualify
DCU doesn’t specify its eligibility requirements, but you’ll need to become a member to get a credit-builder loan. You can qualify for DCU membership by being related to a current member, working at a partner company, living in a qualifying community or joining a partner organization.
MoneyLion: Best for money management tips
5.99% - 29.99%
12 months
Up to $1,000
$19.99/month membership fee
Pros
- Loan money earns interest
- No credit check
- Reports to all three credit bureaus
- Customized advice on building credit
Cons
- High maximum APR
- Monthly membership fee
What to know
Fintech company MoneyLion uses technology to bring you custom money management advice as you pay off your credit-builder loan. Your loan money will earn interest that can help you recoup money spent on interest payments, and you won’t have to undergo a hard credit check to qualify.
Be sure to shop around before accepting a MoneyLion loan, since its interest rates can be steep. You should also budget for the monthly membership fee, which is currently $19.99.
How to qualify
MoneyLion doesn’t specify approval requirements for its credit-builder loan, but you can check whether you’re eligible by prequalifying. This will allow you to see your rates without the temporary damage to your credit that comes with a hard credit pull.
How we chose the best credit-builder loans
Accessibility
We gave lenders points for making their loans available to consumers nationwide, for not requiring membership to get a loan and for skipping a hard credit pull when evaluating loan eligibility.
Rates and terms
To receive top marks, lenders must offer competitive interest rates, low fees and flexible repayment terms.
Repayment experience
We used trusted third-party sources to assess the customer experience with each lender, awarding points to lenders who refund interest and put funds into an account that earns dividends.
To choose the top four credit-builder loans available to consumers across the United States, we systematically reviewed and evaluated the top credit-builder loans currently on the market. We rated lenders across fifteen data points in three categories.
Based on our comprehensive rating system, the best credit-builder loans come from Credit Karma, BMO, DCU, and MoneyLion.
Why trust our methodology?
Senior managing editor and Certified Financial Education Instructor℠ |
“Our writers and editors dig through the facts, contact lenders directly and even go through the application process ourselves if it helps better explain what you can expect. As a Certified Financial Education Instructor℠, I’m committed to breaking down complex financial details so people can make confident, informed decisions with their money.” |
Jessica’s experience in editing and financial education helps shape LendingTree articles that are clear, accurate and truly useful to readers. Her certification means our recommendations are built on a foundation of consumer-first financial knowledge — not just numbers.
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Frequently asked questions
In short, yes. Paying off a credit-builder loan early defeats the purpose of getting a loan to establish a positive payment history. The more on-time payments you make, the more you extend your credit history and demonstrate that you’re a responsible borrower.
Borrow as much as you can comfortably pay back. If you can’t make your loan payments on time every time, your credit will take a hit, defeating the purpose of the loan.
Yes, although you may need to have at least fair credit in order to get a personal loan, and even better credit to get the cheapest rates. You can shop online for personal loan lenders to see if you qualify, as well as check with your own bank or credit union.