Do you remember the first credit card you ever received in the mail? You ripped open the packaging and it was like your Grandma had sent you ten years of birthday cards all at once. A magic piece of plastic that means you can go buy whatever you want with magical money is free!
Only, now that you’re riddled with debt, you’ve realized it wasn’t free and you wish you could tell inexperienced you to lay off the trips to Sam Goody.
The good news? There are ways to recover from your less than stellar credit score and one of the proven methods is using Credit-builder loans. You might also know them by their other names, like Fresh Start Loans or Starting Over Loans.
Here we give you the information you need on the best credit rebuilding loans that will help you bounce back from your previously frivolous lifestyle.
Front Loaded Credit Building Loans
Many financial institutions offer some sort of loan made specifically for building your credit. Essentially, you’re paying for the loan upfront.
These require you to deposit a set amount into a savings account. The bank holds that money for you while you make diligent payments on the loan. Once you’ve completed the payments, while the bank reports positive payment history all the while to the major credit bureaus, your funds are released and able to be withdrawn.
These are ideal for people whose scores are so low that no other loans are possible. But, they do require an upfront investment so you need some capital to get them started.
Personal loans are great to build credit if you have a regular income. You also need not worry about the low score as there are lenders who can offer you unsecured personal loans without checking your credit at all. However, it is a slippery slope. It’s best to go down this route once you’ve already been exercising your money management muscles.
These loans don’t keep the money locked up until you’ve reaped the credit building benefits. So, if you’re not very fiscally responsible already a sudden large infusion of cash can end up costing you points on your credit report in the long run.
Make sure you either use the money towards investment with ROI or are responsible enough to keep the money safe while you make steady payments.
Riskier Loan Types
When you’re desperate you might consider different options like payday loans or title loans. While these can work for some people, for most they simply get you caught in an unending debt loop that is hard for a lot of people to catch up with.
With title loans, you risk losing your vehicle. This could potentially lose you your job because you’ll not be as reliable. You shouldn’t make the decision to get one of these loans lightly. Make sure that you really need the money before starting these cycles.
Credit Rebuilding Loans Can Help Boost Your Scores If You’re Careful
By practicing responsible borrowing and managing your payments successfully these loans are a great way to begin building your credit. As a little but essential tip, choose a loan with affordable payment amount. There is no point in choosing higher payments and ultimately not able to cope up with them. Lenders are more interested in getting their money back. And if you can afford paying high payments just be careful in making timely payments as any delay by more than 30 days can hurt your score badly.
You can keep an eye on your credit score as even a tiny movement could be encouraging.
Combined with paying off your debt, it’s a winning combination to get you to the above 700 club.