A Guide to Loans that Will Help You Build Credit
Whether you have taken out way too many loans in the past or you have never applied for one before in your life, lending is a huge part of your credit history. Loans can very easily lead you down a bad road when it comes to credit, but they can also be the way out. Whether you don’t have any credit history at all or are currently trying to fix your bad credit score, loans can provide a way for you to get the money you need before paying it back and raising your credit standing. Whatever your situation, below is a guide to loans that will help you build credit.
Starter Loans
When you don’t have any credit history and need to get started, there are a few ways to do it. You could apply for your first credit card, but you may or may not get approved for it. Another method is to apply for a starter loan. Starter loans are designed to help those with no credit receive a small loan and pay it off quickly. Try looking for starter loans near me to find a local lender who will get you started on your credit journey. When you have no credit standing at all and need to build your score, applying for a starter loan is necessary to get the job done.
Consolidation Loans
Another loan option to help build and raise your credit is consolidation. Consolidation loans are a great way to cut down on your debt and increase your score. You are probably hesitant to take out a loan when you are already in debt, but a consolidation loan will help you lower your interest rate. You will pay off the loans with a high interest with the loan.
Not only will you lower your rate, but you will also put all of the various debts that you owe to different lenders and create one simple payment with one interest rate. When you have multiple debts to various lenders, consolidating will help you get a handle on what you owe and what you need to pay every month to get out from underneath the debt.
Personal Loans
Personal loans are arguably the most basic form of lending. These loans are either secured or unsecured. A secured loan asks for a form of collateral. For example, if you are trying to buy a car, a secured loan will use the vehicle as the collateral—meaning if you don’t make the payments the lender could repossess your car.
This is a great opportunity for someone with no credit history to kill two birds with one stone. It is possible to take out a loan for a car, buy a vehicle, and raise your credit score by paying it off as soon as possible. Unsecured loans, on the other hand, don’t require collateral but are often difficult to be approved for without credit. Whatever the situation, personal loans can help you increase your credit score if you pay the money back as soon as you can.
Fintech Resources & Lending
Finally, modern lending has diversified. You no longer have to apply for a formal loan from a bank to get the money you need and start building credit. Fintech apps provide resources and easier ways to get access to assets and capital. Online lenders are a modern business that provides a way to increase your credit score with small loans. When you are trying to build your credit score, it is important to utilize the financial technology resources at your fingertips.
Building credit is a multi-faceted endeavor. Whether you have dug yourself a credit hole or don’t have any history at all, loans can help you increase your score and build your credit standing. You might think loans are detrimental because they can lead to bad credit, but they can also be your way out.
A starter loan can help you begin your credit journey, a consolidation loan will lower your interest and make one monthly payment, personal loans can be secured with collateral and help you build credit, and utilizing fintech resources can all provide the ability to build credit and open up the door to new financial opportunities.