What is a credit builder loan?

A credit builder loan is to help people build or repair their credit score. Unlike regular loans, the lender holds the loan amount in a secure account. You make fixed monthly payments. These payments are reported to credit bureaus. Over time, this positive payment history can boost your score. Once you’ve paid off the loan, you get access to the money, often with some interest. These loans are useful if you have no credit history or a low score. They usually have simple eligibility requirements. You might need to show proof of income and identification.

Credit builder loans are available from different banks and NBFCs. They’re a practical way to start building a strong credit profile. Make sure you pay every instalment on time. Missed payments can hurt your score instead of helping it. Using a credit builder loan responsibly sets you up for better loan and credit card offers in the future. It’s a good step for anyone looking to improve their financial standing.