Let’s face it – not everyone has a good credit score. In fact, there are hundreds of thousands of people throughout the United States that have bad credit and face difficulties when applying for loans and other lines of credit. Luckily, there are installment loans available online for individuals with bad credit.
Installment Loans – An Overview
Installment loans are loans that require you to make set payments over a repayment period, at the end of which the loan will be fully paid off. There are different types of installment loans, such as mortgages, car loans, and personal loans.
Online installment loans can be found easily, but you must be discerning when choosing a lender to work with. For example, installment loans online from Personal Money Network or another reputable lending company are safe and fast. You can also find lenders in physical stores, where you can speak with a loan provider in person and learn about your options and the terms associated with the installment loan you want.
When utilized properly, an installment loan can be highly beneficial to your credit score. While there are other ways to build up your score, let’s discuss how you can boost your credit score using an installment loan.
Pay Off Credit Cards
Any open credit accounts that you have should be kept under 30% utilization. Having as low of a balance as possible on credit cards, or getting rid of your balance completely, reduces the negative impact of your credit debt on your score. Using an installment loan, you can completely pay off cards and boost your score.
Consolidating your debt is one of the many ways you can lower debt or eliminate it completely. When you consolidate your debt, you merge several small debts into one large debt that you can more easily pay off. Instead of making several payments to different lenders, you will instead make a single payment to a single lender.
Tips for Paying Back Installment Loans
If you have bad credit, your installment loan will likely be for an amount under $1,000. However, even small loans need to be managed so that they don’t cause damage to your score. If you’d like to shorten the amount of time spent paying off a loan, there are some tips you can use to effectively manage your loan and pay it off.
Make Double Payments
If you’re serious about paying back your loan, you can double up your payments. By paying twice the amount your loan specifies, you significantly shorten the time it will take to repay the loan. However, make sure to communicate with your lender to ensure payments are applied correctly and you will not be penalized for paying ahead of time.
Ask About Discounts
While not every lender offers discounts, you may be surprised to find out what options you have when speaking with a lender. You may be eligible to receive a paperless discount, repeat customer discounts, and automatic payment discounts. Before signing up for discounts, though, assess your ability to meet requirements in order to avoid negative implications such as late payments.
Make Extra Payments
You don’t have to double up your loan payments – instead, you may benefit from making an extra payment to your loan whenever you have the funds to do so. You can also divide your payment by 12 and add this amount to each month’s payment, so you make an additional payment over a one year period.
Pay More Than Your Payment Due
If you find it difficult to pay double your payment due each month or make extra payments, you may consider rounding up instead and paying a bit more than your payment due. For example, if your loan terms require a monthly payment of $142.00, you can pay $160.00 each month. By doing so, you pay off your loan a bit faster than you would simply making minimum payments.
An installment loan can be just the thing you need to boost your credit score – though it shouldn’t be used for this reason alone. When utilized properly, you can use your loan for whatever you see fit and pay it off completely, increasing your score over time.
Now that you know what an installment loan is, how it can benefit your score, and how to pay it off on or ahead of time, you can enter your loan agreement with knowledge and confidence. Just make sure to read and understand the terms and conditions of your loan and make sure that you are able to make payments on time before signing any contracts.