Politics and Business
How Installment Loans Improve Credit History
In contrast to other types of debt financing, an online installment loan gives you the utmost convenience to repay in installments over a certain period of predefined time. Timely series of repayments are made to dissolve the entire loan amount which makes it the best source of financing for an-everyday-man. You may engage yourself in auto loans, mortgage loans, personal loans (being the most availed loans for hard cash) or any other type of tenure-bound financing programs that are all different types of installment loans.
You may, at times, have heard a lot of people saying that installment loans improve one’s credit history by adding some healthy score points. The fact is your credit score may not boost overnight but you may be able to add some points if you maintain a healthy repayment schedule with your installment loans.
The regulatory bodies that compile credit reports take into account all your past payment tracks in order to assign you an overall credit score. The credit score you get is a major determinant to getting your loan approved from lending institutions.
Other types of financing may come in handy at times, but a one-time payment (the repayment, to be precise) makes it pretty hard for a borrower to arrange. Whereas, an installment loan is payable over a series of fragmented installments distributed over weekly or monthly whatever is predetermined between the lending institution and the borrower.
If you make timely repayments and get your entire installment loan dissolved under the predefined tenure, an additional score adds up to your credit history. Moreover, an installment loan enhances your credit mix, meaning that this type of financing covers up your deficit or shortfalls of credit history that resulted due to untimely payments of other types of debt financing.
In an ideal situation, a mix of installment debt financing and rotating debt can add up well to your credit score. Rotating debt includes credit cards, running finance or any other type of refinancing mode that revolves upon getting dissolved.
If your credit history mainly consists of rotating debts, adding an installment loan to your portfolio will give a quick and permanent boost that will help you getting your future loan applications approved easily.
Who Should Opt for Installment Loans?
Installment loans give dual-benefit to a borrower. A person who never had a credit history in the past could use this type of financing to establish one. The same could be utilized to repay other types of loans that are already taken by a borrower. In an all-in-all situation, an installment loan would be preferred by:
- A person who lacks a credit history;
- A person who needs to repay other debts with convenience.
Here’s one free advice: With the utmost convenience of installment loans, comes the temptation to overtaking them. You may think of availing larger amounts in the future, but that would only overburden you. Treat your installment loans as a facility at the time of need, rather than relying on them forever.