You have numerous loan types to apply for and each one has a specific purpose. Whether it’s for buying a new car, a house, for emergencies, or even to help pay the bills. The important aspect of these loans is that each one can make your life easier. When it comes to credit builder loans, the same can be said for it because it can change a lot of negative outcomes in your life and business. It can improve your financial situation over time.
Read on to learn more about credit builder loans and why they can be good for you and your business.
What Is a Credit Builder Loan?
A credit builder loan is a convenient tool that can help you build your credit score. Also, it can be used to improve/rebuild your existing credit score if it’s very low and unappealing. Mistakes tend to happen and whether you’re an individual or a business, you might find yourself with a low credit score that can hinder your chances for growth and financial stability. In the case of a business, you need a good credit score that investors, suppliers, and other collaborators can trust to make any business deals with you. With a better credit score, you could apply for better loans later and you could have more chances to expand your business in the future.
Can You Apply For It Anywhere?
Unfortunately, you can’t apply for a credit builder loan from any bank or credit union. You need to find an institute that is willing to trust businesses with low or non-existent credit. For example, if you live in Austin, Texas, you will notice that specific divisions of the capital bank there provide this type of loan. Kyle Burbank from Dyer news suggests that you start researching Credit Strong if you live in the Austin area because that division is subjected to a significant level of regulation and they’re FDIC-insured. This is what you need to look for when you’re searching for credit builder loan providers. You need to find an institute that is legitimate and safe. You need an institute that reports your monthly payments to the major credit bureaus. This is how you can improve your credit score because the process is done professionally.
Why Would Your Business Need This Loan?
Your business would need this loan depending on several factors. You could have a company that just started and you don’t have any credit history to get better deals and investments. Your business can’t thrive or grow if it can’t start at all because investors need assurances that you’re worth the risk. Maybe your company was subjected to an economic crisis and you need to rebuild for a fresh start. This is great because your credit score will improve over time. Starting over means that you must be in an appealing financial shape. Or you could be franchising and building other offices in different areas to expand your business. Doing that needs a lot of money, but credit unions or banks might need your company to have a better credit score to provide you with that funding. This means that applying for a credit builder loan first can land you better loans later because your credit score improved dramatically later.
How Does It Work?
This type of loan works differently than your traditional loans. Some people call it the loan that you never get. This is because the money you borrow is deposited into a savings account. You pay off that loan gradually every month. By doing that, you are improving your credit score. This means that your business can build its credit score easily this way. The catch is that you must pay on time every month and in full. Most of these loans are designed to be easy to payback. This means that they are around 500 to 1000 dollars. The risk levels are low and after you paid off the loan, which is usually after a year, you can get the money. This is a slow but excellent method of building and improving your company’s credit score.
It’s impossible to predict the future, but it’s reassuring to know that the banks and credit unions have the guarantees that can make us comfortable when applying for loans. Credit builder loans are unique and they can improve your chances in a lot of aspects in your life, whether it’s getting a job, finding a better apartment, or having better business deals because your credit score is better. Undoubtedly, credit builder loans are one of the most convenient and effective ways to improve your credit over time.