It is so difficult to come home and have to worry about rebuild your life and build for the future. I’ve learned that you need credit to do to make these things happen, which adds additional frustration. However, Andrew Rombach of https://lendedu.com wrote an excellent article on credit builder loans. These loans are a great way to start building and repairing credit. With permission, I’ve reposted several of the key points he discusses. For Andrew’s full article please click here.
What Are Credit Builder Loans?
A credit builder loan helps you to build or restore your credit via a personal loan. These types of loans are sometimes offered by online lenders, or large banks, but are more likely to be found through credit unions and small community banks. There are a few different types of credit builder loans, but the most common allows you to apply for and take out a relatively small loan of typically between $100 and $1,000 which you repay over a period of six months to a year. The catch is that, to protect the credit union or lender from risk, you don’t get access to the money they’re lending to you until you fully pay off the loan. Because the risk is lessened, the interest rates that you are likely to pay on a credit builder loan are much less than you would pay on a normal unsecured personal loan.
How Credit Builder Loans Build Credit
Credit builder loans help you build your credit because, as you pay them off, you establish a credit history of on-time payments. For those who don’t have a credit history at all, it takes six months of credit activity in order to get a FICO score so a credit builder loan can help you get a score. If you have bad credit, a credit building loan can help you improve your score. Some studies show that your credit score could go out as much as 35 points over a six-month period with a credit builder loan.
If your credit is on the cusp of fair or good, then a credit builder loan can help move you into a different credit tier and that could mean that you will qualify for better interest rates, larger borrowing amounts, and the ability to borrow from better lenders on more attractive terms.
Want to know which are the best credit builder loans? Please click here to read the full article.