An easy option, that will help you build positive credit history, are CD secured loans. They come with tighter time lines, but are fast and straight forward funding options.
Secured loans work by offering a lender some form of collateral. This way if you fail to make your payments the lender can still get paid by repossessing the property and using it to make up the money you will owe. Because the lender is taking less of a risk lending you money, you get offered a lower interest rate. Of course, in exchange for this, you are taking more of a risk than you would be otherwise, but as long as you make timely payments you’ll be fine.
CD secured loans use certificates of deposit as the collateral. Certificates of deposit are where you deposit an amount of money, usually over a thousand dollars, at your bank or credit union and agree to keep the money there for a specified amount of time, often one year. During that time the money you deposited will earn a locked in interest rate, hopefully higher than you would be making with a normal savings account.
When you use a certificate of deposit as collateral you have a very short time frame to repay the money you borrow. You have to make your payments before the specified amount of time for the certificate of deposit has run out. This is the only real drawback of this option.
The benefits of CD secured loans are numerous. First of all, unlike with other forms of collateral, you won’t need to have your property appraised. This cuts the time out of the application process down substantially. Also, because the bank or credit union already has the collateral in their possession things are fairly straight forward and the application process is incredibly simple. Because the company is taking a low risk with this type of funding you are offered a very low interest rate, which will save you money.
Not every bank, or credit union, offers this option, so you’ll need to check with the institution you got your certificate of deposit at.
Because of the short of this option it will not be for everybody. Often this option is advertised as a great way for someone with no credit history, or bad credit, to get a loan and help build up a positive credit history by making their monthly payments on time. The best way to build credit is to try and establish a history of on time payments, and CD secured loans are a fast and easy way to accomplish this.
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