What is the best credit-builder loan that gives you money upfront?

The only credit-builder loan that gives you money upfront is from MoneyLion. It gives you a portion of your loan funds at the start of the 12-month repayment period, and then you get the rest at the end of your loan term.

Normally, credit-builder loans require you to make monthly payments that are put into a savings account held by the lender. When you’ve made all the payments, the money in the savings account is released back to you, minus interest and fees.

How to Take Out a MoneyLion Credit-Builder Loan

1. Apply for a Credit-Builder Plus membership, which you need to have in order to apply for the credit-builder loan.
2. Pay the membership fee once MoneyLion has done a soft credit check and approved your membership. The membership fee is $19.99 per month, though you can effectively earn this back through the Lion Share Loyalty Program, which gives you cash rewards for your account activity.
3. Apply for a credit-builder loan. You can get credit-builder loan amounts from $100 up to $1,000.
4. Receive a portion of the loan money in your bank account if you’re approved.
5. Make the required monthly payments, which will go into a MoneyLion savings account minus the amount that MoneyLion charges as interest for the loan.
6. Receive the rest of the funds in the savings account once you’ve made all the payments.

The overall APR for the credit-builder loan will be 5.99% - 29.99%, but that interest rate is only charged on the money that you pay into your MoneyLion savings account. Interest is not charged on the portion you receive upfront. MoneyLion may also charge administrative fees.

Another Way to Earn Money on Credit-Builder Loans

Some credit-builder loans may allow you to earn interest on funds held as collateral, but this is a slower way to get money from a credit-builder loan. For example, some lenders will put your credit-builder loan payments into a certificate of deposit (CD) account that bears interest. At the end of the loan repayment period, you’ll receive the loan amount plus the interest that your funds earned.  

Alternatives to a Credit-Builder Loan

A passbook loan, also known as a cash-secured or share-secured loan, allows you to use an existing savings account with a bank or credit union as collateral for the loan. While you repay the loan, your savings account will continue to earn interest at the normal rate so that your savings can still grow while you’re making payments and building your credit.

Alternatively, if you need money quickly, you might consider a personal loan that caters to borrowers with low credit scores or no credit history. With these options, you’ll be able to borrow money within days of being approved. You can estimate your potential rates using the free pre-qualification tool on WalletHub.

You can also consider an unsecured credit card for borrowers with no credit history or bad credit. You won’t have to put down a security deposit and can begin using your card once you’re approved and receive the card in the mail.

To learn more, check out WalletHub’s guides to credit-builder loans and how to build credit.