If you have poor or no credit, it's difficult to get loans or to build your credit profile. One way to tackle these problems is to use a credit-builder loan. We've provided the 411 on credit-builder loans here so you can understand how they work and if one could be right for you.
Credit-builder loans have short terms and involve borrowing an amount of money that's held in a bank account while you make payments on it. They are also known as Starting Over Loans or Fresh Start Loans. You may not have heard of them because they are usually available through smaller organizations such as community banks and credit unions - and not heavily advertised. Though this loan does not require credit history or good credit to qualify, you do need to show that you can make the necessary payments.
If you'd like to pursue a credit-builder loan, you'll need to do some research to find one with a payment that you can easily afford. After you've applied for it, and, if approved, the amount borrowed is placed in an account you can't touch until you've paid it all off. This makes the loan less risky for the lender.
To get the most out of this loan, you should:
Once you've paid the loan in full, you will receive the total amount and whatever interest has accrued on the account. If you didn't miss payments, your hard work will show in an improved credit score.
This way of building credit takes patience and discipline. But if you stick to your payment schedule, a credit-builder loan can be a great asset in your credit-building toolbox.
To read more on this subject, go to:- What Is a Credit-Builder Loan?