If you have bad credit, you may be wondering how to improve your credit score. You also may be concerned about getting loans, and what a loan means for your credit. Luckily, there is a type of loan that can actually help you improve your credit, and is still possible to get with poor credit: an installment loan.
What is an installment loan?
Installment loans are loans that are taken out and repaid over a long period time, often a year or more. Because they are paid back over a longer period, installment loans also tend to have lower interest rates than loans that must be paid back more quickly. Installment loans tend to be used for large purchases that you can’t pay back immediately, such as a mortgage on a house or a loan for buying a new car. Installment loans are paid back, usually in monthly installments, over a set amount of time. Unlike credit card bills, there is no exact minimum monthly payment on installment loans. Instead, the amount you take out is divided evenly across the amount of time you will take to pay it back.
How installment loans help improve your credit score
Installment loans can be extremely helpful in improving poor credit. Because installment loans tend to be repaid over a longer period of time (longer than loans like payday loans), they allow you to build a steady history of repayment. If you can take out an installment loan and make all of your payments over the period of that loan, your credit could improve.
If you have bad credit, and are looking to take out a loan for a bigger purchase, like a car, consider applying for an installment loan. This way, you can buy what you want and improve your credit all at once.