Individuals just starting out quickly learn that having no credit can be as bad as having past credit issues. Lenders want to see an established credit history before they will risk working with a borrower. How can a person go about building this history if nobody wants to work with them? Fortunately, there are companies that will provide funds for these individuals to help them establish a credit history that will carry into the future. However, people need to take care when choosing this type of loan to ensure they know what they are getting.
Secured or Unsecured
The first thing a person needs to know when considering an installment loan is whether the loan is secured or unsecured. Unsecured loans are not backed by collateral, as their name suggests. A secured loan is one that is linked to an asset. In the event the borrower does not pay, the lender can seize the asset as payment. Think of a car loan or mortgage. This is a secured loan. Unsecured loans are perfect for those who have no credit or assets, as the funds are provided even without collateral. However, a person pays a higher interest rate as a result.
Timely payments on an installment loan help to raise your credit score. Furthermore, there are other ways the loan may be of benefit in this area. Credit reporting agencies look at the types of loans established by a borrower when calculating a score, and adding an installment loan may help in this area. In addition, they look at the total amount of credit a person has obtained and the amount owed. As the installment loan is paid off, the person’s score improves. All of the above help to build a person’s credit or reestablish it.
Contact Blue Trust Loans to learn more about installment loans, how they work, the benefits of this type of loan, and more. Many people find this is the perfect option to help them establish or rebuild credit and do so in a reasonable period of time. The key to success, however, lies in making the payments on time each month. One missed payment can be very harmful to a person’s credit, so don’t make this mistake. You want to ensure you are moving forward at all times to have a financial future that is bright.