Whether you are trying to boost your credit score for the first time or are trying to get out of debt, you might not think that loans are the way to go. However, loans can be the way to raise your credit. If you pay off the loans immediately, lending can be a great way to prove that you are trustworthy with money and that you can pay it back. It doesn’t matter where you’re at in your life, raising your credit is always necessary. Below there are five types of loans that can help you raise your credit score.
Starter Loans
First, a type of loan that is great for raising your credit is a starter loan. Starter loans are designed to give people without credit a chance to start building their score. They offer small amounts that a lot of people can pay back quickly. This makes it so those without credit are approved for a loan and can afford to pay the money back on time and in full. A starter loan is a great place to get started if you don’t have any credit at all.
Installment Loans
Another type of loan that can help you build a credit score when you don’t have any credit history is an installment loan. These are loans that have small payments, making them easier to pay off. They are also typically more localized. Whether you are looking for Missouri installment loans or need to find an installment loan in New York, California, or Portland, there are plenty of different types of installment loans that you can look for. Whether you have bad credit or none to begin with, an installment loan can give you the chance to pay back money quickly and increase your score.
Consolidation Loans
A loan that is great for those who have bad credit and owe multiple lenders money. When you are struggling with accounts with various creditors, it can feel overwhelming. What a consolidation loan does is help you pay off all the multiple debts and put them into a single debt with one monthly payment and interest rate.
Of course, you are probably hesitant to take out another loan if you have debt, but when you owe multiple lenders money it can be difficult to get out from under it. Not only will you have a chance to pay back the money you owe and move on, but you will also have peace of mind that you know exactly how much you owe and what interest you need to pay.
Credit-Builder Loans
Unlike a lot of loans, credit-builder loans don’t allow you to access the funds until you’re done paying off the loan. This may seem strange but think about it. You will build your credit by making set monthly payments that you can afford to pay off.
Then, at the end, you will have a lump sum of money that you already paid off. You will be in a great spot, with your credit score increased and your pockets full of cash. Credit-builder loans are designed to put you in this place when you have paid off the loan. This incentivizes you to pay it off as soon as possible to build credit and get back on top.
Credit Debt Settlement Loans
Like debt consolidation, a credit debt settlement loan is a loan you take out from a lender to pay off one loan with bad interest. That’s the difference. Instead of paying off multiple debts to different creditors, you are paying off one and are basically switching lenders. This can really help you when you are trapped in a loan with horrible interest rates. If you can pay the loan off by switching creditors and getting a better interest rate, you will be better off and capable of paying off the money that you owe.
Loans are often the cause of debt, but they can also be the solution. If you know how to use loans properly and understand the variety of options you have, it is possible to get out from under the weight of debt or build your credit score for the first time. Depending on what you are trying to accomplish, loans can help you build credit and raise your score.
