Archive Links

Consumer Archive
CU System Archive
Market Archive
Products Archive
Washington Archive

News Now

CU System
Motley Fool explores value of CU credit builder loans
ALEXANDRIA, Va. (7/15/14)--For as little as $50, consumers and credit union members can now purchase a better credit score, thanks to credit-building loan products that are becoming increasingly more popular at smaller financial institutions.

The personal investment website The Motley Fool posted an exploration of the loan product Sunday.

As explained by the site, credit-builder loans carry low-interest rates and are structured to help borrowers cultivate stronger credit history.

Consumers take out small dollar loans, between $500 and $2,500 for example, and the funds are then placed in a savings account or certificate of deposit.

The consumer then pays off the loan over the next six to 18 months in full, at which point the entire amount is given to the borrower, all for the cost of a few dollars in interest.

For the consumer, the process results in a head start on a savings goal, in addition to an improved credit score. But the financial institution benefits as well.

"Credit-builder loans are a (small) goldmine for banks," The Motley Fool article's author Jordan Wathen said. "The loans carry absolutely no risk for (credit unions), since the loan proceeds are not disbursed to the customer until the loan is paid off."

When deciding whether to utilize the credit-building loan product, Wathen has several suggestions:
  • Take out a credit-building loan in the smallest amount possible, and borrow from a local credit union, which offer the lowest-cost loans. This option can help repair credit at the lowest cost; and
     
  • Consider alternatives such as a no-fee credit card that can also help build credit.


RSS print
News Now LiveWire
.@CFPB obtains $92M in debt relief from Colfax Capital Corp. http://t.co/QPZAeCAcy2 See also: http://t.co/Kjf4HHkINW
59 minutes ago
Julian Castro was sworn in as 16th secretary of @HUDgov Dept. of Housing and Urban Development Mon.
1 hours ago
.@CUNA's Chief Economist @SchenkMike talks consumer confidence--at highest levels since 2007 w/ @TheStreet @JoeDeaux http://t.co/JyoYQmhAxc
1 hours ago
RT @CUNA: .@CUNA's Jeremy Dalpiaz congratulates @reppittenger on reg relief bill consideration after @FinancialCmte markup http://t.co/9JMG…
1 hours ago
Hensarling: "Post Dodd-Frank we've seen community banking wither on the vine under regulatory burden, w/ costs passed to low income buyers"
2 hours ago