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o you’re thinking about taking out a loan, but you’re a little scared of the unknown since you haven’t done it before. Today, we’re going to help educate you on what happens to your credit when you take out a loan.
The first thing to remember, is that loans do impact your credit score. However, they may be a more viable means of improving credit than other approaches like paying credit card bills timely, etc. This is for a few reasons. Personal loans are installment loans, which mean they won’t hurt your credit score as badly should you be late on a payment, or something of that nature. They also can help boost your score more quickly than just a credit card, as they diversify the types of credit that affect your score. However, the converse effect is also possible. Not making payments can result in big problems for your credit history. As long as you make at least the minimum payment on time, you’ll be OK. However, to truly build credit efficiently, you need to pay more than the minimum on time. Even better, pay a little more than the bottom line, and do it a few days before you’re supposed to. This will help you achieve a low owing rate (the remaining balance of your outstanding debt), and this also helps boost credit.
Also, when going through the process of actually seeking a loan, make sure to find ones with the most reasonable terms. You’ll want to consider the interest rate of the loan, the amount you’re asking for, and the time frame you have to pay the money back. Before signing onto any agreements, look over your budget and finances one last time. Make sure you know this is something you can feasibly do, and start coming up with a game-plan to pay it off early. You’ll thank yourself later when your credit is soaring!
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