A credit builder loan is designed to help individuals build or rebuild their credit history. These loans can benefit those with no credit history or those who need to repair their credit history after setbacks. For those who wish to build credit, it can be a valuable tool in your journey to better financial health.

How Credit Builder Loans Work

Credit Builder loans differ from traditional loans because they are CD-secured (Certificate of Deposit) funds that do not require upfront funds. Instead of receiving the loan amount up front, the funds are held as collateral in a secured account, such as a CD, until the loan is fully repaid. Here is how it works:

1. Application

   The first step is to apply for a credit builder loan with a lender such as Cadence Bank. Since these loans are designed for individuals with limited or challenging credit history, the approval process may have more flexibility than traditional loans or other lines of credit.

2. Secured Funds

   Once approved, the loan amount is placed in an interest-earning CD. This serves as collateral for the loan, reducing the lender's risk.

3. Monthly Payments

   You make monthly payments over a set term, typically ranging from 6 to 24 months, depending on your loan. These payments include both principal and interest.

4. Credit Reporting

   Each on-time payment is reported to the major credit bureaus, which track your credit history. This helps to build or improve your credit score.

5. Access to Funds

   After you’ve made all the payments, the loan amount and any interest earned is released to you.

Benefits of Credit Builder Loans

1. Build Credit History

   Regular, on-time payments help establish a positive payment history, which is a significant factor in your credit score.

2. Improve Your Score

   Demonstrating responsible credit behavior can improve your credit score over time.

3. Savings Component

   Since the loan amount is held in a CD, you also build savings even as you improve your credit.

4. Increased Accessibility

   These loans are often available to individuals whose credit history may make it difficult to obtain traditional loans.

How to Get Started

Cadence Bank offers credit builder loans with features designed to help you succeed. Let us help you build or rebuild your credit history. To find out if a credit builder loan is the right fit for your future, find a branch near you and talk to a Banker at your local Cadence Bank to get started on your path to financial success today.

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This article is provided as a free service to you and is for general informational purposes only. Cadence Bank makes no representations or warranties as to the accuracy, completeness or timeliness of the content in the article. The article is not intended to provide legal, accounting or tax advice and should not be relied upon for such purposes.