Self offers credit-building loans for as little as $25 a month, but it's only worth it if you make all payments on time

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  • Self Financial is an online lender that offers credit-builder loans that can boost your credit score.
  • Customers pay Self in monthly installments, from as little as $25 per month. 
  • A Self loan could be a good option if you have no credit or poor credit history.
  • Self reports all your payment activity to the three major credit bureaus, so make sure you're able to make each monthly payment on time to avoid damaging your credit.
  • See Business Insider's guide to the best personal loans »

Credit cards can be a useful tool for boosting your credit score, helping you demonstrate to credit bureaus that you can make your payments on time. But what do you do if you can't get approved for the card you want, can't afford the security deposit on a secured card, or simply want to build your credit without the temptation to overspend?

Enter the credit-builder loan, designed specifically to help you pad your credit score by paying your lender in installments that get saved and, ultimately, returned to you. You can find credit-builder loans at local banks and credit unions, although membership qualifications may be a hurdle for some people.

Luckily, there's an alternative, and that's Self Financial. Self, an Austin, Texas-based startup founded in 2014, is an online lender that offers credit-builder loans over 12- and 24-month periods to help customers with little or no credit build up their payment history.

How Self Financial loans work

The first step is to choose a loan based on how much you want to pay monthly.

You can select from four options:

  • $25 per month over 24 months
  • $35 per month over 24 months
  • $48 per month over 12 months
  • $150 per month over 12 months

After you've made your pick, fill out an application for a credit-builder account, backed by Self's FDIC-approved financial partners. Once approved, you can activate your account with a one-time, non-refundable $9 administrative fee.

At that point, Self will issue your loan — but instead of giving you the funds directly, it'll put the money into a certificate of deposit (CD). As you make your monthly payments, Self reports your payment activity to the three major credit bureaus, Experian, Equifax, and TransUnion.

When you've paid off the loan, the CD will unlock and the money you've paid will come back to you within two weeks or so, minus interest and any unpaid fees.

Who are Self loans for?

If you have no credit or a damaged credit score in need of repair, Self could be a strong option for you. Payment history makes up 35% of your FICO credit score, so the ability to show bureaus that you can deliver timely payments can go a long way toward getting you on the right track credit-wise.

Plus, the service is easy to use and affordable, giving it a leg up on credit-builder loans from other sources. With Self, you won't have to meet any credit union qualifications, and you can boost your credit for as low as $25 a month.

In case it doesn't go without saying, though, if you're not sure you'll be able to make your payments, it's probably not the best time to start a Self account. The service reports your payment activity whether or not your payments are on time, meaning that if you miss one or more, you could wind up doing more harm than good to your credit score.

Other options to consider for building credit

Of course, there are other options out there for those who want to give their credit score a makeover, but they're not necessarily viable for everyone.

Case in point? The secured credit card. Those with poor or no credit can generally get approved for a secured credit card — provided they can put down a security deposit. But that deposit can require as much as $200 or $300, which some people can't afford to put down all at once.

A personal loan is another route to building credit, though lenders tend to charge sky-high interest rates on loans to those with bad credit. Becoming an authorized user on someone else's credit card can also do the trick, assuming the primary cardholder makes payments on time — you'll need a friend or family member willing to bring you onto his or her account.

If you're sold on a credit-builder loan but not ready to settle on Self Financial, consider Kikoff, another online lender. Kikoff works in a similar fashion to Self, but it has some key differences, including its one-size-fits-all $12 loan. Customers pay back that loan in 12 monthly installments of $1 each, and Kikoff doesn't charge any fees to get started.

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Business Insider may receive a commission from The Points Guy Affiliate Network, but our reporting and recommendations are always independent and objective.

Please note: While the offers mentioned above are accurate at the time of publication, they’re subject to change at any time and may have changed, or may no longer be available.

Disclosure: This post is brought to you by the Personal Finance Insider team. We occasionally highlight financial products and services that can help you make smarter decisions with your money. We do not give investment advice or encourage you to adopt a certain investment strategy. What you decide to do with your money is up to you. If you take action based on one of our recommendations, we get a small share of the revenue from our commerce partners. This does not influence whether we feature a financial product or service. We operate independently from our advertising sales team.

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