Using a Secured Loan to Rebuild Your Credit Rating

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Written By Financial master

 

 

 

 

 

Even if you’ve failed to meet your credit and loan repayment obligations in the past there’s light at the end of the tunnel if you’re interested in rebuilding your credit rating. Many people, particularly the young and the reckless, have made the mistake of being tardy with their credit and loan repayments and as a result – they’ve found themselves with a less than enviable credit rating that’s now impeding their ability to successfully apply for loans with competitive interest rates.

 

So you want to rebuild your credit rating?

Fortunately it’s possible to rebuild a credit rating and by doing so, successfully apply for loans with competitive interest rates in the future. Be aware that the rebuilding process doesn’t magically take place overnight – there are often significant time periods involved, so be prepared to spend some time rebuilding your credit rating.

Opinions differ on what the most effective ways to rebuild a credit rating are, though most experts agree that secured financial products, like secured credit cards and secured loans, are the most advantageous financial products to use when rebuilding a poor credit rating because they’re easier for borrowers with undesirable credit ratings to apply for.

If you’re unsure of the difference between a secured and an unsecured financial product, a secured financial product is one for which collateral has been supplied, whilst unsecured financial products are those issued and supported solely by the creditworthiness of the borrower.

 

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By Emily Conwell under CC BY 2.0

 

Secured credit cards and loans: Your saving grace?

If you decide to use a secured credit card as a means to rebuild your credit rating ensure you’re able to resist the temptation to spend freely, after all you’re trying to improve your credit rating not worsen it. Don’t make the mistake of applying for more than one card either, one is enough at this point and if you unsuccessfully apply for another card this could take a negative toll on your credit rating, be patient, make regular purchases and always make at least the minimum payment by the due date, it may take a little while but you’re on the way to rebuilding your credit rating.

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Secured loans are for many the more astute choice, for not only can they use the funds for something useful, but they also know exactly how much their repayments will be and can create a budget that enables them to comfortably meet their repayment obligations. As secured loans require collateral you’ll have to save up before applying, though as the process of rebuilding a dismal credit rating takes time – and you will have to be patient, this often proves character building for borrowers with poor credit ratings, after all the reason so many borrowers have dismal credit ratings in the first place is because of impetuous and impulsive borrowing behaviour.

Take your time when sourcing a suitable secured loan, you’ll quickly realise that there are many products out there and some are more advantageous to apply for than others. Secured instant cash loans are an astute choice as the application process is easy and in many cases can be performed entirely online, plus the borrower needn’t take out a loan for a large sum of money either, just enough to pay for something they need and to rebuild their credit rating in the process.

When rebuilding your credit rating is the goal, you’ll find that making repayments on a secured loan each month goes a long way toward showing future lenders that you’re no longer a credit risk and that you can handle your credit obligations responsibly, moreover, you’ll have a good credit rating to prove it.