November 02, 2017

Perks of Credit Builder Loans

By Sona Mathews
A credit builder loan is an exclusive type of loan which can help you in building the credit score from scratch or repairing it. This means it is one of the best loans with bad credit. This the best thing about these loans because you don’t need to have a good credit initially. Since the credit builder loans are never advertised much often, so you probably have never heard of them. But, if you search local community banks and credit unions, you will find some. These loans are provided to the people so that they can make up a good and reasonable credit score.

Perks of Credit Builder Loans: eAskme
Perks of Credit Builder Loans: eAskme
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Working on a credit builder loan

If your credit is bad or you are out of credit, then you can apply for a credit builder loan. The lender has already applied very strict rules as he will surely be concerned about the amount. All the borrowed money will be deposited in a savings account, and you have to return the loan in full before accessing the borrowed amount. On paying back the loan in full, lender credit union or bank will send a positive report to major credit bureaus on behalf of the customer. Thus, if you can pay back the loan completely within the time, then you shall get the money deposited in a savings account and a better credit score.

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So, you have to be sure to pay back the loan completely within time. If any payment is missed, then it will also count in as a negative score and reported to credit bureau. The financial institutions will easily lend money to the customers because they are protected, and in case, anything goes wrong, and the customer doesn’t uphold his end of the deal; the lender credit union will be able to reclaim their investment if anything goes wrong and customer.

Secured installments of a credit builder loan

Anyone who has low credit score doesn’t necessarily have to hold low income. If the customer has hidden any money in the bank, then he can explore other ways to pay back the loan; via secured installments or by getting a loan which is certificate backed. The money deposited towards credit builder loan will be used as collateral. The borrowed money will either be frozen, or its installments will be frozen until the loan is paid back. If you have sufficient funds in your local credit union or community bank, then you can borrow against that money for restoring your standing.

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Thus, credit builder loan is a very good option for building credit. The collateral feature is good for both lender and customer since it allows lesser interest rate for the customer and also reduces the risk for the lender. Usually, the interest rate drops to about less than 10%. The customers can avail themselves of this loan in a benefitting way and pay back all the acquired loan in the allotted time and fulfill all terms and conditions. In this way, customers can easily boost their credit.