What Are Credit Builder Loans?
People say that, if you owe zero debts and you have ten dollars in your pocket, you are rich. This is a motivating thought if you are trying to pay off your debts. Perhaps you are rich if you have ten dollars in your pocket and you own a house unencumbered by a mortgage and a car with no car loan. Try buying a car or renting an apartment for ten dollars, though. If you are old enough to have expenses that cannot be found in the candy aisle of the gas station, then you will probably be responsible for paying for things that cost more money than you currently have in your bank account. It is fine not to have a credit score if you live rent free under your parents’ roof and they let you eat whatever food they put on the table, but most people will need to borrow substantial amounts of money at some point, and in order to do this, they must persuade prospective lenders that they can be trusted to repay the money they borrow. Therefore, it is important to build your credit history if you have recently entered the workforce for the first time or if you are recovering from a financial setback such as a bankruptcy filing. For more detailed advice about building or rebuilding your credit score, contact a Plantation credit repair lawyer.
The Art of Borrowing From Yourself to Build Your Credit
It is very difficult to get unsecured loans when you have no credit history or a low credit score. Therefore, if you want to borrow money, you will need to secure the loan with collateral. Homeowners can use their houses as collateral for home equity loans. If the only capital you have is modest sums of cash, then you can and should use it as collateral to borrow modest sums of money. This will help you raise your credit score so that you can qualify for unsecured loans soon.
How Do Credit Builder Loans Work?
Credit builder loans are loans that you pay off before you before them. If you want to borrow $1,000, you sign a loan agreement with the lender, and the lender sets the money aside for you but does not give you access to it. Then you pay the lender in installments, for example, $100 per month for ten months, until you have paid off the entire loan. Only then does the lender give you the loan money. From a numerical standpoint, you are breaking even, or putting your money in a piggy bank and then taking it out. The difference is that the lender reports your payment history to the credit reporting bureaus, whereas a piggy bank does not. Therefore, at the end, you have the money you saved plus a better credit score.
Work With a Debt Lawyer About Rebuilding Your Credit Score
A South Florida debt lawyer can help you start rebuilding your credit if you recently filed for bankruptcy or otherwise suffered harm to your credit score. Contact Nowack & Olson, PLLC in Jupiter, Florida to discuss your case.