Credit repair loans are designed to help people struggling with bad credit or those who have no credit history to build credit. A high credit score will make approval for loans and credit cards with lower interest rates possible. Basically, this type of loan is designed to help you slowly build your credit score over a period of twenty-four months. It will look great on your credit report and can significantly boost your score.
You don’t have to have good credit to qualify for this type of loan, however, you do need to show proof that you make enough money each month to pay the loan back. The amount of money you borrow will be held in a bank account while you make payments. Payments made on time are reported to the three credit bureaus. Because a credit score is calculated based on information found in your credit reports, payments that are made on time can have a huge impact on your credit score.
Credit repair loans and secured credit cards can both help you to establish credit or boost your score. But which option will have the most impact on your credit rating?
This type of loan is also referred to as a starting over loan, or a fresh start loan. They aren’t usually advertised and are typically offered by credit unions or other types of small financial institutions.
A credit union or other type of financial institution will want to see you succeed, considering if you become a customer then you’ll be more likely to make them money in the future.
But in order to make sure you don’t take their money and run they will often set in place strict limits.
Qualifying for a Fresh Start Loan
Your first step will be to search for financial institutions that offer this type of loan. Look for one with monthly payments you can easily pay off, with a term that’s no longer than two years.
If you’re approved for the loan, the money you borrow will be deposited into a savings account that you won’t be able to access until the loan is fully repaid. This works as sort of a safety net for the credit union.
How to Pay Off Your Loan Faster: Supplementing Your Income
Make sure you make monthly payments on time, every time. A payment even just a week late can negatively affect your score. This is your chance to start building your credit, which is why you may need to plan on an extra way to earn more in order to ensure your payments are made in a timely manner.
If you find yourself struggling to make your payments on time because you’re on a tight budget, click here to read our article on CB Passive Income, which can be an option if you’re searching for an easy way to supplement your income.
Another option for some is learning how to invest in real estate with little money, however, if you don’t have any money in savings, this supplemental income option can be a better choice once you’ve established good credit and have paid off all of your outstanding debt.
Finding a Start Over Loan
Community banks and credit unions are both great options for credit repair loans. But finding one in your area can be tricky. If your local bank or credit union doesn’t offer this type of loan, try looking online. Online lenders often offer loans starting at just thirty dollars a month for twenty-four-month loans, which makes paying off a larger loan more manageable.