What You Should Know About Loan Builder Loans
Strong credit can help you buy a car or get a decent mortgage rate. If you want to improve your rating, you may want to consider a loan builder loan. Here’s a rundown of what they are and how they can help improve your credit.
Your credit rating depends on many factors, including which credit accounts you open and how much credit is available to you. Loans for lending companies can help you improve your rating because they offer a line of credit that is reported to each of the three bureaus. They are usually offered by credit unions.
You are approved for a specific amount, usually no more than $ 1,000, says loan officer John Ulzheimer . But you are not given the loan amount. Instead, the credit union deposits them in an interest-bearing savings account. Then you make monthly payments. “When the loan is paid off, the money will go to the account,” explains Ulzheimer. It’s like paying money before borrowing. After all, the idea is not to gain access to money; this is in order to improve your result.
Like Ulzheimer, loan officer Alex Gerard recommends this type of loan for building credit. He tells GOBankingRates that when combined with a credit card, these loans can help you establish and improve your score in a year. But keep in mind that most credit unions charge interest on your monthly payments, so as the New York Times reports , you will end up paying for the loan. Basically, you pay to get your rating higher, but the Times adds that some nonprofits offer loans at 0%. If you go with a home loan, just make sure you know what the rate is.
We have some additional tips to improve your result . And to find out what else you should know about these loans, including how to apply, check out the rest of the GOBankingRates article below.
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