Alternative - Credit-builder loans
The credit industry never stops developing and adjusting to consumers’ needs. Subprime borrowers and those with no credit history comprise a significant part of creditors’ and lenders’ potential customers. Like any market, they adapt and come up with new solutions – so stay on the lookout for new and interesting products.
A credit-builder loan is a small loan that freezes the loan amount in an account until you’ve paid off the balance. Some lenders open a savings account in your name or lock the funds that you already have in a savings account. After you make the last payment, you’ll get access to the funds.
Like a secured card, this kind of loan requires an upfront payment, and like an installment loan, it charges interest. As a result, in the end you get less than you’ve put in. Not to mention, you won’t have access to the funds you’ve invested for quite some time – often for a year or more.
All of this makes the Chime credit builder credit card a more favorable option. However, you could use both tools together to strengthen your credit portfolio and diversify your credit mix. Lenders and creditors like to see that you can manage different kinds of debt well.