If you’re like hundreds of thousands of people worldwide, an unexpected financial event may have put you into debt for some time. You may have had some trouble paying it off in a timely manner. This happens to many of us, and the resulting impact on the credit score can be a significant cause of stress.
Repairing your credit after that can be almost as stressful as being in debt in the first place. In the eyes of creditors, a one-time slip up can be seen as you being untrustworthy with money, and can result in financial ramifications in the years to come.
One tool many are now seeking is referred to as a credit repair loan. This is a service offered typically by smaller financial institutions to help people start over after some financial turbulence. In fact, some banks refer to them as “start over loans” by name. If you’ve just suffered a loss of credibility because of being unable to pay down a loan, it would probably sound like a loan is the last thing you need right now. But then, these types of loans function much differently than the typical style of a loan.
Essentially, a credit repair loan is that in which the money borrowed is deposited on a savings account in the bank issuing the loan. After making all of the monthly payments towards the loan and paying it off, the money is then released back to you.
Let me explain the process from beginning to end:
Smaller financial institutions typically offer this type of loan as it is a good way for them to secure money on a line of credit, as well as to bring in new customers. A wise choice for those interested in a start over loan is to seek a loan that will be paid off within a year or two and has monthly payments well within your level of income. After figuring out how much you can comfortably loan while still making the monthly payments, apply for the loan and wait for it to be approved.
Now that the loan has been taken out, the borrowed money is held in a savings account that you are unable to access until the loan has been paid in full. You’ve essentially borrowed from a bank to pay the bank for an account with that much money inside of it.
The next step is to make all of the payments on time. As you continue to pay the loan on time, the bank will report all of these on-time payments to the major credit bureaus, resulting in your credit score going up.
Once the outstanding loan has been paid off, the savings account holding the money inside of it will become available to you, allowing you to spend the money as you please. The incentive credit unions have for this is they are creating new customers who are looking to keep their finances on track. Now that you have an account with them, you’re likely to continue banking with them. This is what they are looking for – more business.
From beginning to end, that’s what a credit repair loan is all about. It’s a fairly risk-free way to quickly repair your credit score and enable you to get back to where you’d like to be financially. The biggest difference in this type of loan, compared to others, is that once you’ve paid off the loan, you will have access to the money as opposed to traditional loans, where you get the money immediately, and will then have to pay it off. These loans are seldom advertised. You’ll probably have to specifically ask for one at a credit union or community bank.
If you’re looking for more in-depth information about credit loan repair, click here.