Credit Builder Loans

0:00 Ralph: Have you heard about credit builder loans, but aren't quite sure what they are. Or if they're right for your situation, we'll stay tuned because in today's episode, We're diving deep into the world of credit builder loans to help you understand the pros, the cons, and whether the financial tool aligns with your values as a Christian. This is an episode you don't want to miss.

0:51 Welcome to our Saturday show. I'm so glad you chose to join us. I just want to thank you for listening and supporting the program. I'm coming to you this morning from the Estep farm. and the Saggio Accounting studio. Let me put on my podcaster hat and put down the overalls and set aside the adding machine and let's get into some financial wisdom from a Christian perspective. Today, we're tackling a topic, that's been generating some buzz lately, and that's these things called credit builder loans. So today we're going to talk about what exactly they are, how they work. And most importantly, are they a wise choice for Christians seeking to be good stewards of their finances? We've got a lot to unpack. So grab your notebook and let's get started. Before we get started, don't forget to subscribe to the show and join our email list.

1:33 You do that at askralphpodcast.com . So you don't miss tomorrow's show tomorrow. We're going to be talking about how to stop worrying and start living, of course, from a Christian perspective on our Sunday spiritual podcast. So let's start today with our relevant Bible verse. This one comes from the book of Romans chapter 13, verse eight, and it says this. Owe no one anything. Except love to each other For the one who loves another has fulfilled the law. The verse reminds us that as Christians, our primary obligation is to love others as God has loved us. While it doesn't explicitly forbid borrowing money. It does caution us against becoming indebted to the point where we neglect our other responsibilities.

2:15 So let's start off by asking the basic question. What is a credit builder loan? First things first, let's define what we're talking about. A credit builder loan is a unique financial product designed to help individuals with little to no credit history, establish or improve their credit score. Here's how it works. You apply for a credit builder loan through a bank, a credit union, or some online lender. If you're approved the lender, places, the loan amount, usually between 300 to a thousand dollars into a locked savings account, you then make monthly payments to the lender over a set term, typically six to 24 months. And here's the best part. The lender reports your payment history to the major credit bureaus that will be Equifax, Experian, and TransUnion.

2:59 And once you've paid off the loan, you received the funds from the savings account. Back to you. So essentially you're borrowing money from yourself and building credit in the process. It's like a forced savings plan with the added benefit of boosting your credit score. Now that we understand the basics, let's explore some of the advantages of these credit builder loans. The first one. It helps you establish your, improve your credit. The truth is folks. The primary benefit is right here in the name by making on-time payments. You demonstrate to lenders that you can responsibly manage debt, which can help you qualify for better loan terms and interest rates in the future. It's creating that foundation. Number two, it's low risk. Since the loan funds are held in a locked savings account.

3:41 There's little risk of overspending or defaulting on the loans. The truth is also folks. You don't need a large sum of money up front to get started. And number three, it helps you develop financial discipline and we all could use that. And making regular payments on a credit builder loan can help you create a habit of budgeting. And savings. If you listen to this program that's one of the two things I stress all the time, budgeting and savings. Which are essential skills for long-term financial success. Number four generally have relatively low interest rates compared to other credit building options like secured credit cards or sub-prime loans, credit builder loans often have lower interest rates. Now listen, as with any financial product, there are some potential drawbacks to consider.

4:25 So we don't want to just dive in this without considering the pros and the cons. The biggest con is the limited loan amounts, credit builder loans are typically small, so they may not have a huge impact on your overall credit mix. Which is one of the factors that determines your credit score. There could be also fees and interest. Now generally interest rates can be lower than other options. They're not zero. You'll still pay some interest and possibly fees So it's important to read the fine print and understand the total cost of these loans. Here's another thing you got to make sure you're aware of. It requires consistent payments. To see the benefits as with any loan, you've got to make on-time payments every month missing payments could put you right back in that bad credit situation and could actually hurt your credit instead of helping it.

5:11 And here's a big one. It may not address the underlying financial habits. If you have a history of overspending. Or mismanaging your money. A credit builder loan is not going to be some sort of magic wand. That's going to solve all those issues. You really need to dive in and get a better understanding of your overall financial habits. It's, so important to address the root causes of financial struggles, not just the symptoms. As Christians, we know the Bible has a lot to say about money and stewardship. If you've listened to this program for any length of time? I pulled all those things together. So while credit builder loans, aren't explicitly mentioned in scripture, we can glean some guiding principles from God's word first let's consider Proverbs 22:7 which says the rich rule over the poor.

5:55 And the borrower is a slave to the lender. This verse reminds us that debt can be a form of bondage. And we should be cautious about taking on unnecessary loans. I know I certainly mention this verse frequently, but it applies today as well. You don't want to be a slave to the lender. You don't want to create loans that become a bondage for you. However, the Bible also teaches us to be wise stewards of our resources in the parable of the talents. That's from the book of Matthew chapter 25, verses 14 to 30. Jesus commends, the servants who invested there masters money wisely and earned a return. Building credit responsibly could be seen as a way of stewarding our financial opportunities to provide for our families.

6:37 And further God's kingdom. And truth is this ultimately the decision to pursue a credit builder loan is a personal one that requires prayer. It requires wisdom and careful consideration of unique circumstances. So you might ask Ralph, how do I know if one of these credit builder loans is good for me? We've got to ask yourself a few questions. Number one, do I have a clear purpose for building my credit, such as preparing to buy a home or starting a business? I always believe that if you have a purpose in mind, it's going to help you make a better decision. Number two, have I exhausted other options like secure credit cards? Or how about becoming an authorized user on someone else's account? Number three, can I comfortably afford the monthly payments without straining my budget or neglecting other financial priorities like tithing savings or paying off high interest debt?

7:24 You've got to consider that. And am I committed to using credit responsibly as a tool? Not a crutch for overspending. If you can answer yes to these questions and feel at peace about moving forward. A credit builder loan might be a viable option for you. But if you have doubts or reservations, it's okay to hold off and seek God's guidance. So let's talk about some actionable steps. I always try to give you some action items. If you decide a credit builder loan is right for you. Here's some practical steps to get started. The first thing you need to do is research lenders. Look for reputable banks, credit unions, or online lenders that offer credit builder loans. And then once you find them, Compare their interest rates compare their fees and their repayment terms.

8:06 Number two. You want to check your budget? If you listen to me, you know, always talk about your budget, make sure you can comfortably afford the monthly payments without sacrificing other financial goals. Remember the point is to build credit, not to create additional financial stress. Number three apply for the loan. You want to gather the necessary documents like proof of income, your identification. And submit your application. Be prepared to answer some questions about your employment, your income and expenses, just like any other loan or financial decision. And here's a big one. Folks. Number four, I can't stress this enough. Set up automatic payments once approved, set up automatic, monthly payments from your checking account to ensure you never miss a due date.

8:47 How crazy would it be to set up one of these credit builder loans? And then make your credit worse in the process. And number five, monitor your progress. Check your credit score regularly to see how your credit builder loan is impacting your credit. Many lenders offer free credit monitoring services. I've noticed with most of the credit cards I have, each of them have a free credit monitoring service built into it. And here's the final thing. Keep the end goal in mind, remember a credit builder loan is a means to an end, stay focused on your larger financial goals. And don't be tempted to take on unnecessary debt just because your credit is improved. You might start getting some offers once that credit score goes up.

9:28 But don't buy into that. The goal is to build wise credit and make wise decisions. Before we wrap up on remind all of our listeners to visit our podcast page, you do that at askralphpodcast.com there you can leave a review, share your thoughts, or even send us a message with questions for future episodes. As I mentioned yesterday, we're building our calendar of episodes. Have you got an idea for the show? I would love to address it on the show. And while you're there, make sure you join our email list so we can send you our daily email with what's going on on the show. A lot of our listeners have said they've really looked forward to that, to know what to listen to today. While you're there. You can also schedule a consultation with me. If you have some specific circumstances that need attention.

10:08 That's one of the things I offered by zoom, or you can do it in person. If you don't live here. In the great state of Delaware, you can do it on zoom. And here's one thing I want you to do. If you know, someone who's struggling with credit and a lot of people are, we are in tough times financially, or they're struggling with their finances, encourage them to listen to this show and to listen to our show in general, we share daily. Ways to improve your financial situation. I think we're up to 400 episodes on our website, all designed to help those who are seeking assistance. If you know someone who could benefit from this, do me a favor and share this episode with them. Well there you have it folks at deep dive into the world of credit builder loans, we've explored what they are, how they work and the pros and cons of what the Bible has to say about the debt and stewardship.

10:54 Building credit is an important. Part of financial health. But as Christians, we must always view it through the lens of our faith. We are called to be wise stewards? To live within our means and to trust God as our ultimate provider. A credit builder loan may be a helpful tool in that journey. But it's not a one size fits all solution. Everyone's situation is different. So before I go, I want to leave you with one final encouragement from Philippians chapter four, verse 19. And it says this. And my God will meet all of your needs according to the riches of his glory in Christ Jesus. So here's something remember, no matter what your credit score is. Remember that your true worth and security.

11:36 Are found in Christ alone. If you found this episode helpful again, be sure to check out our website. That's at askralphpodcast.com for more resources on personal finance and faith. And if you have a specific money question, you'd like me to address on a future episode. Don't hesitate to reach out. As always thank you for tuning in until next time. Stay financially savvy. Keep seeking God's wisdom and may God bless you. Abundantly.