There are many people that would like to try different things that might improve their credit score. By improving it, it can have many different advantages including making borrowing money easier. In fact, you may find that you are very limited in what you can borrow, unless you have a good credit score. You may choose to borrow using an instalment loan though as these do not worry about your credit score and you may think they might improve your credit score too.
What are instalment loans?
An instalment loan sounds like it is just a normal loan that you repay in instalments. While you will be correct about the instalment part, it is not typical of many other similar loans. This is because the loans were set up for those with a poor credit record. This means that you will be able to take out a loan like this even if you cannot borrow form any other lenders because you have a poor credit rating.
The loans also differ form more traditional loans because they can be arranged quickly. This means that if you need money really quickly then they can be useful. Other types of loans may take longer to arrange. This means that if you do need to be quick in getting money then these can be useful for you.
Can they improve credit score?
Improving your credit score is not as easy as it sounds. The main problem is that different people will have different things that they are looking for. For example, one lender such as Cobra might want evidence that you have had a loan and repaid it successfully before they lend to you. Some might be okay with a few missed payments but others may want a completely clean slate. You may also find that some will be fine as long as you can show that you are capable of regular payments even if this is for bills such as utilities.
However, if you have not managed to show that you are capable of making any sort of payments, then perhaps having a loan could help. If you get a loan and then repay it, you will show that you are capable of doing this. You will need to be very careful though as there is a big risk that you will get into more trouble. If you miss any of the repayments then you will struggle to improve your credit rating and you might even make it worse. Therefore, it is so important that you only take on a loan if you are completely confident that you will be able to repay it. It can be worth only taking on a small loan or even making sure that you keep the money that you borrow in a savings account so you know it is there ready for you to repay, although you will need a bit extra to cover the cost of the loan.
It is good to calculate the cost of the loan, so that you know how much you will be paying for it. You should be able to do this using a calculator on the lenders website but if you cannot do this then ask the lender and they will tell you. Do this before you take out the loan and then you can decide whether you think that it is worth this cost. Decide whether you think that it is worth this amount of money to potentially improve your credit rating. Obviously, you will have your own personal feelings about what you think it is worth and whether you are happy to pay this much money. It is worth bearing in mind that some lenders might be put off by the fact that you have used an instalment loan. They might think that if you have turned to this type of emergency loan that it shows that you are not good at managing your money. It can be a difficult thing for you to balance. If you want to prove you can repay a loan, but can only use a short-term loan to do so them you need to decide whether it is worth the risk. It could be worth speaking to lenders to ask how they just credit ratings and whether an instalment loan which was repaid on time would improve your credit rating. They should be able to let you know. If you contact the lenders that you feel you will be likely to use in the future then you will not be taking so much of a risk taking out this sort of loan if you know that it is likely to impress them if you can prove that you can repay it. However, this does mean that you will need to make sure that you repay it. Whether you choose to save the money to do this, try to earn more or spend less or just feel confident you will do it, will depend on your current financial situation. It is worth thinking about your repayment strategy before you take out the loan so you know what to do.