Rebuild Your Credit With An Installment Loan

If you have a murky credit history, it can be challenging to bounce back. Luckily, we can suggest one straightforward way to get the needle moving to the positive side: A credit-building loan.

The premise is simple. You take a small loan with a favorable interest rate, and you repay it over the period of a year or longer. As long as the lender reports to credit bureaus, making timely payments on the loan will improve your credit score over time.

So, what are these loans and how do they work?

What Is a Credit-Building Loan?

But why would anyone lend money to someone with a weak credit score? In large part, it comes down to the fact that people who can secure credit to build their score are much more likely to return to the same lender when they need to make a sizeable purchase.

By offering those in need a second chance to prove their creditworthiness, lenders help customers restore their credit score, so they’ll be able to make that big purchase – a house, for example – when the time comes. The lender then has a return customer.

How Do These Loans Work?

This is where you need to pack a little patience.

Lenders can make these higher-risk loans by mitigating their risk to virtually zero. How is this possible?

A lender holds your funds in a bank account – to which you will not have access until the loan gets paid in full. The lender honors its end of the bargain by reporting your repayments to the credit bureaus. Your record will show that you repaid a loan according to the terms. Over time, this will help your credit score.

Think of credit-building loans as the polar opposite of a quick fix. You might find the idea of holding your money hostage, with no immediate benefit, annoying. Be patient, and keep your eye on the long-term benefits.

Note: The success of this strategy depends entirely on you making payments on time. Failing to do so will have the reverse effect on your credit score, so be sure you can afford the repayment options, or you’ll end up in more trouble than before.

So, who should consider a credit-builder loan, and who should avoid it?

Is a Credit-Building Loan Right For You?

There’s a very particular target demographic for credit-building financing. If you already have good credit and you’re able to qualify for other loans, this won’t be the best solution for you.

If, on the other hand, you’re finding yourself disenfranchised and you have an impaired credit history or no credit history at all, these loans can be highly beneficial. Or if you are considering taking on a secured credit card, but you don’t qualify or are struggling to come up with the required security deposit, a credit-builder loan might be a good fit.

Credit-builder loans can help improve your rating from Fair to Good, or even Excellent. Be sure that you are prepared to relinquish control of a small sum of cash for nominal interest charges and that you’re confident you can make timely payments. You’ll likely find the boost in your credit score is worth it.

If you’re on the lookout for an immediate cash injection, clearly this is not the solution for you.

So, if you’ve packed your patience and believe that a credit-building loan might be a good solution for you, what’s next? How do you go about getting one?

Getting a Credit-Building Loan … the Easy Way

It’s simple to get started. Stop in or call and make an appointment at your local credit union or community bank to discuss their credit-building options.

Or, get in touch with us at Simple Installments at any time. We have access to a wide range of lenders prepared to overlook past delinquencies and give you a second chance – as long as you can afford the monthly payments.

The Bottom Line

If you have no credit history or a credit score that’s screaming for help, consider rebuilding your credit with an installment loan. It’s not a quick fix, but it might be your fastest way to boost your credit score.

In many ways, taking advantage of this kind of delayed-reward financing puts you in training for long-term credit success. Getting into the habit of making timely payments on an installment loan will prepare you for the big-project funding you have in the future. When the time comes to buy that new car or a home, your credit score will be flying high.

Get in touch with Simple Installments if you want additional advice about installment loans. We’re here to help you get back on track!


Vivaan Marsh is a professional writer, editor and an expert in personal finance. Her career as a professional writer stretch for over 11 years. One of her passions in life is to help everyday families with there financial problems, making their life a bit easier and explaining complicated topics in an easy way. Read more >

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