Online Installment Loans Help Rebuild Your Bad Credit
How Online Installment Loans Help Rebuild Your Bad Credit
Don’t feel down and out because you have bad credit. Assuming you didn’t just borrow money without the intent to pay it back on time, most of us want to rebuild our credit. Regardless of how you got into the situation of having poor credit, there are typically many motivators to getting your credit back into the “fair” or higher standing. Fair being the mid 600s or higher.
What should be the most obvious benefit to an individual with bad credit is greater access. While not entirely true, a lot of borrowers feel that they can only utilize online payday loans or no credit check loans to borrow money when they need it. It is true that even with most online installment loan lenders, someone with bad credit does have more limited options and those with good credit. Increasing your credit score to even the mid 600s can open up a lot of doors for you when it comes to where you can borrow money.
Another benefit is cheaper costs. While many payday loans with no credit check often charge a flat fee as opposed to an interest rate, most installment loan lenders charge an actual interest rate over the course of your loan. Generally, the better the credit, the better the interest rate is that you are charged for your money. This means less overall cost to you as you are considered a less risky borrower.
SO HOW CAN I GET MY CREDIT UP?
While your credit score is composed of many different components, one of the biggest factors is your payment history. What many people may not realize is that if you lack positive payment history on your report, you are going to have a very hard time rebuilding your credit. This applies to people who had made late payments or defaulted on previous loans, as well as people who think they are beating the system by never borrowing money or using credit. Both will have a hard time getting approved for credit based loans if they have no positive payment history to show.
Getting an online installment loan for bad credit or one that doesn’t require a credit check for approval is one way you can start to establish some good payment history. An installment loan differs from a typical online payday loan in a variety of ways. Personal installment loans that you would find online are typically no different than a auto loan or mortgage loan. They are set up over a longer period of time than your typical payday loan, so you have more time and a lower monthly payment to pay it back. This is generally more beneficial for someone looking to ensure they are making payments on time to rebuild their credit.
If you were to take out a 12 Month Online Installment loan, such as a Credit Fair-E Loan, and you made all of your payments on time – that would provide you with a year’s worth of positive payments on your credit report. It would also show future lenders that you have the capacity to take out a loan and manage it responsibly to end of the contract.
This won’t single handedly rebuild your credit, but it can make a great start. Should you be in the right financial position to, or in other words don’t actually need the money from the loan proceeds; you could also take the money from the loan and payoff any loans or collection items that may have gone into default in the past. To find out if you have any such items, you can go to AnnualCreditReport.com to get your free copy. Note this is a government sponsored site where you are entitled to one report annually for free, from all of the credit bureaus. Utilizing your loan in this way will definitely help get you on course to rebuilding your payment history.
THINGS TO LOOK OUT FOR
You’ll want to first ensure that the loan you’re getting into is in fact an installment loan. Due to the short term nature and structure of online payday loans, the lenders are not able to report to credit. Plus, they generally aren’t as good for you financially. Next, ensure that even if you are applying for an installment loan that lender reports payment history to the credit bureau. While it would seem to be common sense, not all lenders do.
Finally, make sure that the terms of the loan make sense for what you are trying to do. While rebuilding credit is an important goal, it isn’t worth immediately spending a fortune on. Get a small, reasonable loan to get things started. You can always look at increasing the loan if really need be in the future, as your credit begins to go back up again.
Hopefully this helps you better understand how online installment loans can help you rebuild your bad credit. Credit Fair-E offers such a loan for which you can apply here. Feel free to leave a comment or send us a message on our facebook page to let us know if you’ve ever had success this way or not.