While it may take time to build your credit score, getting a secured loan can help you improve your credit and boost your credit score.
Secured loan defined
A secured loan is a debt linked to your property. So, if you have a home or you are buying one, you can get a secured loan. The amount of which depends on your free equity in the said property, or the difference between the amount you owe and the value of your home. The duration of the loan and interest rates also depend on your equity, as well as on your credit score and other personal circumstances. Many lenders approve secured loans quickly because they are less risky.
Why do I need a secured loan?
- Your credit score will definitely reward you for paying revolving debts
If you want to rebuild your credit history, you can use your own assets to do it. A secured loan will show up on your credit history as an instalment loan that you have to pay on a monthly basis.
Therefore, by paying off instalments, your secured loan can definitely help your credit rating. You can also use the proceeds of your secured loan to pay for revolving debts like lines of credit and credit cards.
- Make micropayments to lower your debts faster
Use the proceeds of your secured loan to make small payments to your credit card balance, even before they fall due. It will lower the debt utilization ratio or your total debt divided by your credit limit. So, if you keep that at around 30-33%, your credit rating will eventually improve.
- Transfer multiple debts to a secured loan. Consolidating all your credit card debts under an instalment loan can improve your debt-to-credit ratio or the amount of money you owe versus your available credit.
Whether you’re living from paycheck to paycheck or you’re earning big time, you should know that the only way to build your credit is to establish your ability to repay your debts, on time. One way to do this is to get a secured loan and create a sound financial plan to manage it wisely.
Three important steps of sound financial management
Do you know why a financial plan is so vital in overcoming debt and building wealth? It may seem to be a boring financial drill, especially if you feel you don’t have enough money to put your financial life in order. But you can never underestimate the value of a sound financial plan, especially when it can help you achieve your financial goals.
- Determine the amount of secured loan you need and other financial sources you have. When you choose to get a secured loan by using your home as collateral, the amount of equity you’ve built up in your home is one of the factors that determine the amount of loan you may qualify for.
- List down where you want to spend it on. Prioritize spending.
- Plan how you can best allocate your money.
Consider applying for a secured loan at Australia Lending Centre. ALC has less stringent lending criteria for people with bad credit. They got reasonable loan terms too!
So, what is a secured loan? It’s one of the options that could get you out of the financial mess.
Contact the Australian Lending Centre today!