Securing Your Credit
Utilizing a Personal Loan to Rebuild your Credit.
Credit is such an unpredictable beast! Is it something you actually ever get under control, tame or secure? The main problem with credit is that most people can’t get themselves under control enough in order to use it properly. That’s why secured loans exist.
Secured loans will keep your feet on solid financial soil a little better than traditional unsecured loans will. Reason being you front the credit, or the $1000 to credit your own loan, so you never spend more than you actually have. Secured loans are often the only option for those who’ve declared bankruptcy or those with really low credit scores. If you have poor credit or have recently filed for bankruptcy or defaulted on your student loans any lender would likely label you a high credit risk, which means you have not been responsible with credit in the past.
The great thing about secured loans is that they offer those with bad credit spending habits a chance to redeem themselves – with a built in safety net. The $1000 you are required to give to the lender in order to get the loan, actually works like collateral. So if you default on your loan by missing a payment; the lender uses your $1000 to make your payment. It’s basically a win-win situation for both the creditor and the borrower. The lender doesn’t have to worry about you defaulting on your loan, and you won’t pay the outrageous interest rates and short terms (length of the loan) attached to most traditional loans, because you’ve got a $1000 safety net.
How does a secured loan help you rebuild credit?
Now that I’ve explained what a secured loan is, I’ll explain how it can help you revive a poor credit score.
You’ve provided your own safety net - We’ve established long as you have the $1000 to put on the secured loan as collateral you will be approved for a secured loan. This helps build up your credit rating in the eyes of other creditors because you have made an act of good faith in yourself. It’s rare that a borrower would risk $1000 if they had no intention of paying off a loan. You’ve shown the creditor this by fronting your own collateral – and your more likely to honor a loan payment schedule when it’s your $1000 at risk if you don’t.
It’s proof of your good credit intentions – You’ve heard the saying “if you don’t believe in yourself, who is going to believe in you”? Well it definitely applies to credit – you can’t expect a creditor to believe that you will pay back a loan if you don’t show them you have every intention to do so. Applying for a secure loan is proof of your intentions. That’s why other creditors will look more fondly on those who have taken out a secured loan and paid it back, when it comes time for you to apply for other types of credit. They will weight your repayment behavior with your secured loan more heavily than past credit indiscretions such as bankruptcies and missed payments on credit cards and loans.
It’s your get-out-of-jail-free card – Not all bad credit scores are caused by missed credit card payments, defaulted loans or blatant irresponsibility when it comes to paying bills. Many folks find themselves in financial hot water due to unexpected job loss, medical illness or disability. Throw a person with bad financial budgeting skills any of these unfortunate circumstances and chances are they will get behind on their bills. That’s why applying for a secured loan is your second chance. The bad credit label doesn’t last forever, and if you show creditors you are trying to make financial amends, your credit rating will start to improve within 2 to 6 months.
The old pay off – The easiest way to rebuild your credit is with a secured loan. Once you’ve paid your $1000 deposit and are approved for your loan, just deposit the entire loan - $2000 - into a savings account. As its collecting interest, make your payments as you should every month. Don’t touch the loan for any other reason other than to make your loan payments. It sounds easy doesn’t it? And it’s the best way to show creditors that you’re able to be trusted with credit once again.
10 tips for easy savings
In order to get back on the road to good credit with a secured loan, you need to save that $1000 deposit. This might be easy for some, but for those with little financial willpower it will be a challenge. I would recommend seeking the advice of a financial planner, who will help you set up a strict monthly budget that you can live by.
In the meantime, you can start saving by making tiny self-sacrifices in your lifestyle. Many of these don’t even qualify as sacrifices because you’re probably spending money on things you don’t actually need – such as that daily cup of coffee or lunch. Little changes to your lifestyle can help you save a lot of money over a short period of time.
Take for example the following 10 money saving tips:
- Daily lunches – Do you brown bag it to work? Well your wallet would suggest otherwise. If you eat out every single day, you’re likely spending between $5 to $10 per day on restaurants. Now if you brought your lunch to work you would save about $25 to $50 per week – that’s $100 to $200 per month.
- What’s in your garbage? Do you purchase those custom little garbage bags for your waste baskets and garbage cans? Well start saving your grocery bags from shopping trips and using those instead. Another bonus: Less plastic is better for the environment too.
- Clip coupons – Don’t be ashamed to use coupons from the newspaper and online.
- Sign up for free product samples – I sign up for free face creams, shampoos, shaving creams and conditioners online. The sample sizes are excellent for touting to the gym and on vacation, plus these are free (small sized versions are $2 each at the drug store)!
- Don’t grocery shop hungry – Whenever I go to the grocery store hungry I end up spending at least $25 more than I should. Eat before you leave the house and write a list – and stick to it! Plus, if you eat before leaving the house you will be less tempted to by take out food.
- Be a sales stalker – Keep an eye out for specials that you know you will need in the upcoming weeks. The saddest thing about store specials is when no one takes advantage of them.
- Lend your entertainment – Have you been to the movies lately? I went last week and by the time we purchased tickets, beverages and snacks my wallet was $50 lighter. One night at the movies can cost a bloody fortune. Try borrowing your movies from the local library instead. You’d be surprised at their selection, and if you’re a library member – it’s free!
- Car pool– Chances are that you live close to someone you work with. If you do arrange a car pool to work. It will save you both money on gas and wear and tear on your vehicles. The more people you get to join your car pool; the more you’ll be saving.
- Take it from the tap – Do you buy fancy bottled water, juice or pop by the cases? Well water is not only better for you – it’s free from the tap. If you’re concerned about the cleanliness of your water install a filter. It will save you roughly $15 bucks a week (that’s $60 per month) on store-bought beverages.
- Reduce appliance use – How many times a week do you do laundry? Run your dishwasher? Turn on your air conditioning? From now on when you do laundry or dishes make sure it’s a full load. Oh and if you’re hot open a window – it will cut the cost of electricity bills in half.
See you’re already on your way to saving that $1000 you need to apply for a secured loan.
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