Credit builder loans are designed to help people with limited or poor credit histories build or improve their credit scores. The loan proceeds are deposited into a savings account or certificate of deposit that the borrower cannot access until the loan is paid off in full. By making timely payments on the loan, borrowers establish a positive payment history which is reported to the credit bureaus, thereby improving their credit score. However, credit builder loans often come with fees and interest, and the borrower cannot access the funds until the loan is fully repaid. It is crucial for borrowers to weigh the pros and cons of a credit builder loan carefully before deciding if it is right for them.

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