Starter Loans: Definition, Eligibility & 9 Best Options

Credit is like friendship. Nurture it, and it flourishes; ignore it, and it fades away. When you’ve never used credit at all, it’s shocking to see how limited your choices are. It’s hard to get a credit card, car loan, and sometimes even tough to get a job. What’s worse, the bank tells you that without credit, you can’t build any!

Don’t worry, the whole system isn’t against you. When you have no credit you can build your score much faster than those with established reports. I did it, many others have done it, and you can do it too. Credit starter loans are a great way to begin. In this guide, I’ll explain these loans, outline the specific criteria you need to get one, and list out top 9 picks so you save time and choose the best option for your situation.

Our Top 3 Picks

Looking for a list? Jump to it ↓

Managing your credit can feel overwhelming. Credit repair agencies tell you to dispute erroneous items and sell you software to do so. You have to learn about revolving lines, installment loans, APRs, credit card average daily balance calculations, and more.

The interest calculations feel mysterious and you there’s always a fear that hidden fees are going to bite you later. Plus there are too many types of loans to count.

I’m here to spread the good news. There are really only 3 options to consider when you have limited or no credit history:

1. Credit Builder Loans,
2. Secured Credit Cards, and
3. Credit Starter Loans

We’re focusing on starter loans, and we’ll clear up how they actually function, so you can move forward with confidence.

What is a credit starter loan?

Credit starter loans are personal installment loans created for borrowers with limited or no credit history that have low credit score requirements, average APRs of 11%, and low average principal amounts of $1,000 (with some going as high as $50k). They are also called credit builder loans when the lender requires a secured deposit as collateral.

Starter loans typically have the following traits:

• Credit checks: Soft inquiry during the application or “rate check,” then a hard inquiry once you accept the loan.
• Credit minimums: Either the lender has an undisclosed lower credit score requirement OR it uses alternative credit worthiness assessment such as income and debt/income ratio. We decode this for each option on the list.
• APRs: 11% is the average APR for the options on our list.
• Principal amount: $1,000 is the average maximum principal, but they can go as high as $50k. Imagine you inherit a successful business but never took out a loan. Your “starter” loan could still be very high.
• Structure: Secured loans are installment based. One option on our list of 9 is a revolving line of credit.
• Collateral: Lenders may require secured deposit as collateral, but not always. We decode this for each option on our list.

Is it hard to get a first time loan?

Your first loan may be tricky to obtain because lenders don’t know how to evaluate your risk. Banks often deny consumers without credit history, as evidenced by Wells Fargo’s credit standards. That’s where starter loans come in handy.

Can I get a starter loan with no credit?

The purpose of starter loans is to provide money to consumers who have no credit, so having zero credit history won’t prevent you from getting one. Banks use high APR rates and low principal amounts to protect themselves from the risk that you default. That’s how a starter loan works in the first place.

Should I get a starter loan?

The ideal profile for starter loans is a borrower with zero credit history, stable income and no other debts. Typically, the profile is people aged 18 – 21 without student loan debt. Borrowers with zero history have a 24% higher chance of score improvement.

That said, we live in the real world. Like any loan, starter loans can always have a positive impact on your score when you make payments on time and in full.

To determine whether a starter loan is right for you, use these questions as a guide. They’re based on FICO credit score criteria and loan terms.

1. Is the APR lower than other loans? You’re taking the starter loan to build credit, so make sure you’re getting the lowest APR for the duration and principal you want.
2. Can I combine it with a secured credit card? 10% of your credit score comes from types of credit used. Starter loans are installment based and secured credit cards are revolving credit.
3. Can I become an authorized signatory on a trusted family member’s credit card instead? Becoming an authorized signatory gives you access to the credit benefits of a close one’s credit card usage, and it doesn’t require credit approval.
4. Will the monthly payments be less than about 30% of my income? The general principal for installment loans is they should be less than 30% of your earnings. Many lenders won’t even approve you if it is higher, so keep that in mind.
5. Will I have other expenses during the loan that could make repayment difficult? If you expect to have expenses over the course of the loan that could cause a missed payment, you should avoid getting the loan. There’s no sense in drawing credit if you’ll do damage.
6. Can I use the proceeds to improve one of my assets? If you can use the loan proceeds to repair something in your home, pay off another loan, or another value-creation expense, then you may even make money using the loan. Avoid spending on depreciating assets like you car, however.
7. Does the lender report to credit bureaus? This is a must. Not every lender reports to the bureaus, so you should ensure the lender does before taking the loan. All of the options on our list report to TransUnion, Experian, and Equifax (with the exception of Kikoff’s credit account, which doesn’t report to TransUnion).
8. Will I be able to take another loan after to maintain a payment history? This one is counterintuitive. Once you start your credit building journey, it’s like maintaining a friendship. You have to nurture it, or it will fade away. To keep your score strong you’ll need credit card or another loan once you finish the starter loan.

Who are the biggest starter loan companies?

After researching over 50 loans, we found that the 9 best starter loan companies are Upstart, Upgrade, KeyPoint Credit Union, Kikoff, Western Shamrock, MoneyLion, Coast Line Credit Union, FreeStar Financial Credit Union, and DreamSpring. These are loans we rank and review below.

Rating Methodology

Our rating methodology consists of quantitative and qualitative factors. We assign points to each factor based on its importance to the acquisition of a starter loan. Some factors, such as APR, carry a higher weight than others. Some factors, such as geographical limitations for credit unions, carry less weight because they are case-specific and do not apply to all readers.

We evaluate quantitative factors based on their distance to the mean through standard deviation or percentile ranking. We evaluate qualitative factors on a tiered basis. Finally, we perform a “gut” check to ensure the methodology provides a user focused result and is not purely mechanical.

We use the following 7 factors:

• Average principal amount (higher = better)
• Average APR (lower = better)
• Average duration of loan (longer = better)
• Soft vs Hard Inquiries (soft = better)
• Trust Score (excellent = best; poor = worst)
• Origination fee (binary)
• Geographical availability (more states = better)

Let’s jump into each of these options, so you can decide which is best for your circumstances.

What’s the best starter loan?

Here are my picks for the best starter loans:

Lender	Our Rating (of 10)	Best for…
Upstart read review →	9.55	Best Overall (No History or Bad Credit)
Upgrade read review →	9.40	Best for Suite of Services (Loans, Cards. Accounts)
KeyPoint Credit Union read review →	9.40	Best from a Credit Union (California)
Kikoff read review →	9.40	Best Credit Line for Lazy Borrowers
Western Shamrock read review →	9.25	Best for Super-Short Term Loan (4 Months)
MoneyLion read review →	9.25	Best for No Credit Check
Coast Line Credit Union read review →	9.20	Best for Maine Residents (Cumberland, Sagadahoc or York Counties)
FreeStar Financial Credit Union read review →	9.20	Best for Payment History (35% of credit score)
DreamSpring read review →	9.15	Best $500 Starter Loan

Upstart

Eligibility

There’s no sense applying for a loan if you don’t qualify. Here are Upstart’s eligibility criteria:

• Minimum Age: 18
• Social Security Number: Required
• Employment Status: Employed
• States Available: 48
• Debt-to-income maximum: 50% (45% in select states)
• Bank Account: Required
• Email Address: Required

Bottom Line: why is Upstart a good starter loan?

An upstart loan of $1,000 over 36 months is a great starter loan to establish credit over time without breaking the bank with a trustworthy, established brand.

Upgrade

Eligibility

Upgrade is an awesome loan, but it doesn’t make sense to apply if you don’t meet the basic requirements. Here the minimum of what you need to get approved:

• Minimum Age: 18
• Social Security Number: Required
• States Available: 48
• Bank Account: Required
• Email Address: Required

Bottom Line: why is Upgrade a good starter loan?

Upgrade provides competitive APR and principal amounts, but more importantly it provides a $200 bonus when you open a credit account and make 3 payments. Add to this that you don’t have to be employed, and it’s a niche opportunity for the right person.

KeyPoint Credit Union

Eligibility

Before applying, make sure you meet the minimum criteria:

• Minimum Age: 18
• Social Security Number: Required
• Employment Status: Employed
• States Available: 1 (California)
• Bank Account: Required
• Email Address: Required

Bottom Line: why is KeyPoint credit starter a good starter loan?

If you’re based in California, KeyPoint’s 0% APR loan over 24 months is probably the best starter loan opportunity available to you. It establishes payment history over two years (35% of your FICO). KeyPoint holds the principal in savings, so you’ll collect a lump sum down the road while having built up your credit in the meantime for free. There’s really no downside to the loan to get your credit started.

Kikoff

Kikoff is a credit line of up to $750 that you can use much like a credit card, but with 0% APR. By making your minimum payment each month, you’ll build credit with Experian and Equifax (but not TransUnion), and you won’t run the risk of building a mountain of debt. The catch is the money can only be used to purchase materials inside Kikoff’s store, which include financial literacy curriculum.

You’ll pay a flat $5 fee per month to use the service, so you’re essentially paying to be “lazy” because the internal store structure holds your hand through the credit building process. If you struggle to budget and stick with your financial plans, then Kikoff could be a good choice for you.

Another cool side of Kikoff is it doesn’t require employment and never runs a hard inquiry on your credit (unlike every other option on our list). What’s more, because it’s a revolving credit line and not an installment loan, there’s no minimum debt-to-income requirement.

Bureaus Reporting to	Is secured collateral required?
Experian, Equifax	No

Principal Range:	$0 – $750
APR Range:	0.00% – 0.00%
Duration Range:	1 month
Origination Fee:	$0.00
Other fees:	$5/month
Structure	Line of Credit

Credit Check on Application	Credit Check on Approval
Soft Inquiry	Soft Inquiry

Eligibility

• Minimum Age: 18
• Social Security Number: Required
• Employment Status: –
• States Available: 49
• Debt-to-income maximum: –
• Bank Account: Required
• Email Address: Required

Bottom Line: why is Kikoff a good starter loan?

Kikoff makes it easy to leverage a line of credit in a controlled environment where you won’t be tempted to rack up debt. At $5/month subscription, you’ll pay a flat fee instead of APR, which is easier to plan for. Kikoff is a great choice for “lazy” borrowers.

Western Shamrock

You wouldn’t know it from their subpar website, but Western Shamrock is a well-reputed non-bank lender base in Missouri, New Mexico, Oklahoma, and Texas. Anyone working in the industry would think red-flag 🚩 when they read these states because they’re notorious for high APR rates.

You should be careful when taking loans over 36%, but if you get denied from the previous options then one of these loans could be a good choice. Western Shamrock has a good reputation and a host of online reviews suggest customer service agents are friendly and helpful.

The real advantage is the provision of installment loans over 4 months. In general, you should be wary of short-term loans because APRs will be higher and the benefit to your credit is limited. Make sure you get clear information on the monthly payments, but when you need something to get started, you need it.

Bureaus Reporting to	Is secured collateral required?
TransUnion, Experian, Equifax	No

Principal Range:	$0 – $2,000
APR Range:	0.00% – 175% (except Maine)
Duration Range:	4 – 30 months
Origination Fee:	10% or $200, whichever lower
Other fees:	5% or $10, whichever lower
Structure	Installment

Credit Check on Application	Credit Check on Approval
Unk	Unk

Eligibility

• Minimum Age: 18
• Social Security Number: Required
• Employment Status: Employed
• States Available: 4
• Debt-to-income maximum: –
• Bank Account: Required
• Email Address: Required

Bottom Line: why is Western Shamrock a good starter loan?

In a sentence, Western Shamrock is best used as a backup plan if you’re denied from the other lenders on our list. The reason it ranks 5th on our list is its the only option providing a starter loan over 4 months. Though shorter loans make less sense financially, some unique circumstances like short-term expenses but expected income can make them a good option.

MoneyLion

MoneyLion is a subscription-based finance “superapp” that provides a $1,000 credit builder loan with an APR between 5.99% and 29.99%. The credit builder loan is not structured like most because you get partial money upfront (usually half, or $500). Other offers in the subscription include an investment account and a cash advance account, all for $19.99/month.

Before you tell yourself that’s way too expensive, consider the additional service that money allows MoneyLion to provide; they have exceptional customer service and a tier-one app. The app gets updates over time, compared with smaller lenders like Western Shamrock who may not be able to consistently provide support that won’t leave you feeling undeserved.

Plus, the subscription means MoneyLion doesn’t require you be employed.

Bureaus Reporting to	Is secured collateral required?
TransUnion, Experian, Equifax	Partially

Principal Range:	$1,000 – $1,000
APR Range:	5.99% – 29.99%
Duration Range:	12 – 12 months
Origination Fee:	$0.00
Other fees:	$19.99 membership to MoneyLion
Structure	Installment

Credit Check on Application	Credit Check on Approval
Soft Inquiry	No

Eligibility

Before you apply, make sure you meet the minimum requirements here:

• Minimum Age: 18
• Social Security Number: Required
• Employment Status: –
• States Available: 50
• Debt-to-income maximum: –
• Bank Account: Required
• Email Address: Required

Bottom Line: why is MoneyLion a good starter loan?

The credit builder loan is a nice alternative to Upgrade and Upstart if you get denied. You’ll have access to various financial instruments and for a flat fee of $19.99/month.

Coast Line Credit Union

If you’re based in Maine, Coast Line’s starter loan is available to you. It provides up to $2,500 principal loan for APR as low as 7.40%, which means it’s a good option if you’re denied from Upgrade, Upstart and other options on the list. The trouble with it is a hard inquiry on the application, which could stay on your credit report for up to 2 years.

Bureaus Reporting to	Is secured collateral required?
TransUnion, Experian, Equifax	No

Principal Range:	$0 – $2,500
APR Range:	7.40% – 30.00%
Duration Range:	12 – 36 months
Origination Fee:	$0.00
Other fees:	$0.00
Structure	Installment

Credit Check on Application	Credit Check on Approval
Hard Inquiry	Hard Inquiry

Eligibility

Since the hard inquiry occurs when you apply, you should really make sure you meet these minimum requirements before applying:

• Minimum Age: 18
• Social Security Number: Required
• Employment Status: Employed
• States Available: Maine
• Debt-to-income maximum: 40%
• Bank Account: Required
• Email Address: Required

Bottom Line: why is Coast Line Credit Union a good starter loan?

Coast Line’s starter loan is a good secondary option if you’re denied from more favorable options on the list above and you live in Maine (Cumberland, Sagadahoc or York Counties). If you have family ties already in the credit union, you could consider leveraging that relationship to evaluate what your rate would be without submitting a formal application, as it could be as low as 7.40%.

FreeStar Financial Credit Union

The biggest thing FreeStar Financial Credit Union has going for it is a long-term credit building solution. It provides a 1-year $1,000 loan with a hefty APR of 18.99%. Before you throw this option out the window, note that you earn your way into a larger $2,000 loan for another year of credit building.

The catch is the first loan is secured (meaning you won’t receive the funding until the loan matures), but the second loan is unsecured, so you’ll get the money upfront.

Because it comes from a credit union, this loan requires a hard inquiry on your credit report the moment you submit the application.

Bureaus Reporting to	Is secured collateral required?
TransUnion, Experian, Equifax	Yes

Principal Range:	$1,000 (YR 1) – $2,000 (YR 2)
APR Range:	18.99% – 18.99%
Duration Range:	12 months
Origination Fee:	$0.00
Other fees:	$0.00
Structure	Installment

Credit Check on Application	Credit Check on Approval
Hard Inquiry	Hard Inquiry

Eligibility

You should avoid hard inquiries to your credit report at all costs, so make sure you meet the minimum requirements below before applying.

• Minimum Age: 18
• Social Security Number: Required
• Employment Status: Employed
• States Available: Michigan
• Debt-to-income maximum: –
• Bank Account: Required
• Email Address: Required

Bottom Line: why is FreeStar Credit Union a good starter loan?

If you’re in Michigan and have zero credit, FreeStar’s credit builder loan is structured in a way that will help you build credit over two years, feeding your payment history credit score metric. If you have trouble sticking to the plans you set yourself and live in Michigan, this may be the perfect choice for you.

DreamSpring

Sometimes simple is good, and non-profit DreamSpring understands it. They offer a $500 with 0% APR, making this an interest-free option that’s not limited to California residents like KeyPoint Credit Union. It’s an unsecured loan, so you’ll get the money upfront, and you only need to pay a $25 origination fee.

We would recommend DreamSpring higher on the list, but unfortunately due to the non-profit nature of the business they struggle to provide strong customer service.

Bureaus Reporting to	Is secured collateral required?
TransUnion, Experian, Equifax	No

Principal Range:	$500 – $500
APR Range:	0.00% – 0.00%
Duration Range:	6 months
Origination Fee:	$25
Other fees:	$0.00
Structure	Installment

Credit Check on Application	Credit Check on Approval
Soft Inquiry	Hard Inquiry

Eligibility

Note: DreamSpring is limited to entrepreneurs only. You cannot get it as an individual, personal loan.

• Minimum Age: 18
• Social Security Number: Required
• Employment Status: Entrepreneur
• States Available: 27 (Alabama, Arizona, California, Colorado, Florida, Georgia, Illinois, Iowa, Kansas, Louisiana, Michigan, Mississippi, Missouri, Nebraska, Nevada, New Mexico, New York, North Carolina, Ohio, Oklahoma, Pennsylvania, South Carolina, Tennessee, Texas, Utah, Washington, and Wyoming).
• Debt-to-income maximum: –
• Bank Account: Required
• Email Address: Required

Bottom Line: why is DreamSpring a good starter loan?

For entrepreneurs looking to get their credit started, it’s hard to do better than DreamSpring. With 0% APR, a low $500 amount, and availability in 27 states, entrepreneurs have a good option with DreamSpring.

Now we’ve gone through the best options, let’s look at a few important topics and frequently asked questions.

Whats the fastest way to get a loan with no credit?

When you have no credit, the fastest way to get a loan with the terms you want is by building credit. Otherwise, you’ll be forced to choose from a series of subpar options. And the fastest way to build credit is with a starter loan, which are designed for beginners.

That said, if you’re in a rush and need quick funding with no credit, you’ll have to sacrifice something and generally that means a high APR. The best options on our list for this is Upstart, which has a strong reputation for honoring its marketing pitch to fund within 1 business day after approval as long as you accept by 5 p.m. EST (New York Time).

What is the easiest loan to get approved for?

As far go pure loans, there’s no way to say which one is the easiest. In general neo-lending solutions like Upstart and Upgrade have a lower barrier to entry than more traditional institutions like credit unions and banks. On our list, the easiest to get approved for is Kikoff, but you can only use the proceeds within their branded store so it’s not a solution if you need cash upfront. The second best option is Upstart because they fund within a day of approval, then Upgrade.

Comparative Table

Now that we’ve 9 starter loans, you’ll need to choose which one is best for you. It’s hard to compare the terms scrolling up and down the page, so I compiled a list of all the data points. Use this to compare them sides by side, then scroll up again to get my commentary.

Lender	Rating	Best for…	Bureaux	Secured	Principal	Duration	APR	Credit Check on App	Credit Check on Approval	Trust Score
Upstart	9.55	Best Overall (No History or Bad Credit)	TU, Experian, Equifax	No	$1,000 – $50,000	$36 – $60	6.50% – 35.99%	Soft Inquiry	Hard Inquiry	Excellent
Upgrade	9.40	Best for Suite of Services (Loans, Cards. Accounts)	TU, Experian, Equifax	No	$1,000 – $50,000	$24 – $84	7.96% – 35.97%	Soft Inquiry	Hard Inquiry	Excellent
KeyPoint Credit Union	9.40	Best from a Credit Union	TU, Experian, Equifax	Yes	$500 – $500	$24 – $24	.00% – .00%	Hard Inquiry	Hard Inquiry	Average
Kikoff	9.40	Best Credit Line for the Lazy Borrowers	Equifax & Experian	No	$ – $750	$1 – $1	.00% – .00%	Soft Inquiry	Soft Inquiry	Excellent
Western Shamrock	9.25	Best for Super-Short Term Loan (4 Months)	TU, Experian, Equifax	No	$ – $2,000	$4 – $30	.00% – 175% (except maine)	Unk	Unk	Great
MoneyLion	9.25	Best for No Credit Check	TU, Experian, Equifax	Yes, partially	$1,000 – $1,000	$12 – $12	5.99% – 29.99%	No	No	Excellent
Coast Line Credit Union	9.20	Best for Main Residents (Cumberland, Sagadahoc or York Counties)	TU, Experian, Equifax	No	$ – $2,500	$12 – $36	7.40% – 30.00%	Hard Inquiry	Hard Inquiry	Poor
FreeStar Financial Credit Union	9.20	Best for Payment History (35% of credit score)	TU, Experian, Equifax	Yes	$1,000 – $2,000	$12 – $12	18.99% – 18.99%	Hard Inquiry	Hard Inquiry	Great
Dreamspring	9.15	Best $500 Starter Loan	TU, Experian, Equifax	No	$500 – $500	$6 – $6	.00% – .00%	Soft Inquiry	Hard Inquiry	Poor

Here’s a comparative table of the eligibility requirements. Keep in mind that when a company doesn’t publicly share their evaluation criteria, I’ve listed it as a “-“. This doesn’t necessarily mean they won’t require it, but it’s not the minimum criteria they share with the public.

Lender	Age	Social Security Number	Employment	States	Debt-to-income	Bank Account	Email Address
Upstart	18	Yes	Employed	48 (see interactive chart below)	50%	Yes	Yes
Upgrade	18	–	–	48 (see interactive chart below)	–	Yes	Yes
KeyPoint Credit Union	18	Yes	Employed	1 (see interactive chart below)	–	–	–
Kikoff	18	Yes	–	49 (see interactive chart below)	–	–	–
Western Shamrock	18	Yes	Employed	4 (see interactive chart below)	–	–	–
MoneyLion	18	Yes	–	0 (see interactive chart below)	–	Yes	Yes
Coast Line Credit Union	18	Yes	Employed	1 (see interactive chart below)	40%	–	–
FreeStar Financial Credit Union	18	Yes	Employed	1 (see interactive chart below)	–	–	–
Dreamspring	18	Yes	Entrepreneur	27 (see interactive chart below)	–	–	–

Conclusion

Credit can be scary, especially when you don’t have any yet. You have to buckle in, apply to starter loans, and build a base of payment history. That said, make sure you carefully consider the options: starter loans, credit builder loans, and secured credit cards. The best option is one that you know you can cover and that lasts as long a period as you can handle.

With careful consideration, you’ll be on your way in no time.

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