These loans aim to help borrowers build up a credit history

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“People spend what they earn, and maybe more,” said Mike Lord, general manager of the North Carolina State Employees’ Credit Union, which has for years provided loans to its members to help them avoid debt. payday lenders.

The credit loans offered by many credit unions usually make at least some of the money available immediately, as borrowers often seek the loan due to a lack of cash. “They need the money now,” said Ann Solomon, vice president of strategic initiatives at Inclusiv, a non-profit organization that helps credit unions serve low-income neighborhoods. This, she said, can help people avoid becoming repeat borrowers.

However, funds borrowed through start-ups like Credit Strong are not immediately available and are not intended for emergencies. Rather, they are intended to help save money for later expenses. “It’s not for someone who needs money tomorrow,” said Erik Beguin, managing director and chairman of Austin Capital Bank.

Typically, clients pay a modest upfront fee plus interest on the loan. The savings account (or, in the case of Self Lender, a certificate of deposit) is held in a bank insured by the Federal Deposit Insurance Corporation, with minimal interest.

Borrowers must be at least 18 years old and have a debit card or bank account to make loan repayments. Startups don’t check credit scores, as you would with a traditional loan, but they do take steps to verify a borrower’s identity and spot fraud. Self Lender examines an applicant’s history with ChexSystems, which may point to a pattern of problem with bank accounts. Credit Strong says it is not disclosing details of its review process for “competitive and security reasons,” but ChexSystems “will not adversely affect the approval” of applicants.

Self Lender is available nationwide. Credit Strong is currently available in all states except North Carolina, Vermont, and Wisconsin.

Here are some questions and answers on home builder loans:

What Kinds of Interest Rates Do Credit Builder Loans Charge?

Rates are typically double digits – higher than the rate on a secured loan like a mortgage, but lower than some credit card rates. According to Credit Strong, a person borrowing $ 495 over 12 months would pay $ 44 per month plus a one-time fee of $ 8.95, at an annual percentage rate of just under 16%. At the end of the loan term, the borrower would have $ 495 in the savings account, plus accrued interest. In contrast, payday loan rates are often triple digits.

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