Taking out personal loans for rebuilding credit is a counter-intuitive move, but it can help your credit score if you handle the money wisely. The credit score is calculated using five factors with each having a different weight. This information will help you decide what loans you are able to afford.
Car loans
It is essential that you pay on time your car loan payments if your goal is to rebuild credit. Your credit rebuilding efforts will be hampered if you make late payments. There are decent car loans available for rebuilding credit. It is not easy to find a decent car loan interest rate with bad credit. However, you can find one if your credit score is good and your payment history is positive.
Applicants with lower credit scores usually pay higher interest rates, so it's important to shop around to find the best deal. Alternatively, you can postpone the purchase of a car until you have rebuilt your credit score and can qualify for a better rate.
Installment loans
If you are punctual with your payments and follow good financial habits, then installment loans could be a great option to repair your credit. These loans report to the credit bureaus every time you make a payment, which helps boost your credit score. However, be aware that late payments can seriously damage your credit score. You will need to find another source of credit if you are unable to make your monthly payments.
Most lenders will require a minimum credit rating before granting you an installment loan. This is because those with high credit scores have a better chance of repaying the loan. In order to determine your interest rate, lenders may consider your annual income.
Payday Loans
Payday loans are great for short term emergencies. These loans come with high interest rates and can require repayment in two weeks. These loans are not for the faint-hearted. In fact, they can cost you more than you expected and can even hurt your credit.
While a payday loan is fast and easy to get, it can be difficult to repay. Paying large monthly installments on payday loans is not a smart idea. Instead, opt for an installment loan that has fixed payments over a specific time period. These loans are designed to help people with bad credit make their monthly payments more affordable and predictable.
Co-signers for installment loans
You can get an installment loan with cosigners if you are rebuilding your credit or need money to buy a house or a car. It is important to note that defaulting on an installment loans will affect your credit score. Because lenders look at your credit history as a risk, they'll be less willing to give you the best loan terms. They might also repossess your collateral.
You don't have to use a cosigner for an installment mortgage loan. There are many other options. A majority of people who require a loan will ask their family members or friends to sign it. This commitment can endanger relationships and be very costly. It's a good idea, therefore, to find out more about loan options.
Fairstone personal loan
Fairstone offers personal loans for those with bad credit who need to rebuild their credit. They offer unsecured and secured personal loans and have more than 240 branches across Canada. The process of applying for a personal loans is straightforward. Your credit score and financial information can be used to determine your eligibility for the loan.
You can apply online, at Fairstone or at any branch. Although it is time-consuming, the process can be completed quickly. You can also send details and documents via email. The application process may be lengthy but it is much faster than other lenders. Fairstone has not posted many reviews of their personal loans online so it is difficult to evaluate the company's customer support.