By : 
Mr Credit Card
Mr Credit CardUnique 2 in 1 Product: Installment Loan and Credit Builder Loan Combo
For those of you who are not too familiar with what credit builder loan is, here is a brief explanation and how it constrast with a traditional install loan. A traditional loan simply gives you money (the loan amount) in your bank account and you pay it back over time in monthly installment payments.
In constrast, with a credit builder loan, you do not get any of the loan amount in your bank account. Rather, you have to payback your interest and principal in monthly installments over the maturity of the loan (and these payments are reported to credit bureaus). At the end of the term, you would have "saved up" a certain amount (which is actually the loan amount). That is why credit builder loans are designed and marketed as a way to save and build your credit history at the same time.
The SeedFi Borrow and Grow is a combination of both and let's look at an actual example that SeedFi gives on it's website to see how it works. I also have to mention that SeedFi also has another product which is a pure credit builder called the SeedFi Credit Builder Prime.
Example of how it works
You take out a Borrow and Save program with a $7,000 amount. Of this $7,500, you can access $3,500 while the other $3,500 is not accessible and is locked in your SeedFi Savings Account until you repay in full. The payment is $120 every 2 weeks and the maturity of the loan is 40 months. The APR is 24.99%.
In your credit report, the loan amount will be reported as $7,000 (though you can only access $3,500).
Possible Terms You Can Be Offered
| Borrowing Range | $1,500 - $9,000 |
| Amount Accessible | $300 - $5,000 out of the ($1,500 - $9,000 borrowing range) |
| APR | 11.59% to 29.99% |
| Term Maturities | 10 - 48 months |
When you decide to get the Borrow and Grow plan, SeedFi will issue a soft inquiry with no impact on your credit score and present you with various options with different terms. If you decide to choose a particularly offer, a hard inquiry will be performed. This is in contrast with the SeedFi Credit Builder Prime, which has no credit checks.
Requirements
- Have a Social Security Number or Individual Taxpayer Identification Number
- Have a bank account in the United States
- Have a phone that receives text messages (SMS)
- Make at least $10,000 in annual take-home (net) income - though the average SeedFi Customer has an average of $54,000
- Live in one of the states where we operate (see Where We Operate)
Though SeedFi does not list it as a criteria on their site, the average customer of the Borrow and Grow program has an average credit score of 600.
SeedFi may ask some of you to provide proof of your income. You can do so the following way:
- Connect your personal checking account via Plaid
- Upload a picture of your most recent pay stub
- Upload a picture of the most recent bank statement from your personal checking account that shows your income.
Our Take: Who is this for?
Perhaps it is easier to answer who should not consider this first. There are some of you who are looking at a credit builder loan simply to add diversity to your credit profile. If this describes you, then you should avoid the Borrow and Grow program and instead get SeedFi's Credit Builder Prime program which is a pure credit builder loan that charges 0% APR and has jusy a minimum monthly payment of $10.
There are some of you who would like to take out an installment loan but feel you still need to build up your credit scores. In this case, I would recommend that you go with the SeedFi Credit Builder Prime first and wait for a few months until your credit score improves before you get an installment loan. At that point, you can shop with multiple lenders instead of just relying on SeedFi.
However, if you are in a hurry and need both an installment loan and yet want to start saving for an emergency fund at the same time, then the SeedFi Borrow and Grow would appear to be an ideal program for you.
