How Title Loans Can Benefit Your Credit ScoreFast Action Finance SEO
If you have a less than perfect credit score and you are in need of money, applying for a title loan is one way to get out of your financial mess. If you are worried whether applying for a title loan will have any effect on your already bad credit then you need to read on to find out how it does. Title loans can either worsen your credit score or help to improve it but this depends entirely on your financial choices. Let’s have at a deeper in look at title loans and how they can affect your credit.
How does your credit score work?
If you have a bad credit score, this does not prevent you from applying a title loan. All you need is a title like say a car title to apply for collateral loans in Toronto. Your credit score is calculated from your financial history and lenders use this information to determine whether you are credit worthy. Your credit score determines whether you qualify for a loan or not especially when applying for an unsecured loan. A title loan can only affect your credit if you are unable to repay your loan since this will reflect in your credit history.
How can title loans improve your credit score?
Your loan payment history plays a huge part in determining your credit score. This means if you apply for a title loan and successfully repay it on time, this report reflects positively on your report hence improving your credit report. It is advisable to have a plan ready on how you plan to repay your title loan on time before applying for one.
Can title loans damage your score?
As mentioned earlier, lenders do not really use your credit score to determine whether you qualify for a title loan or not. However, your past payment history can make lenders not want to deal with you if they find out you are a defaulter. This can only happen if you apply for a title loan and then not pay back on time or default on your payments.
Title loans allow one to make roll overs for the principle amount to the next month and only pay the interest in case you are unable to come up with the amount at the end of the month. Each lender has a maximum number they allow these roll overs. You need to find how many times a lender will allow you to roll over your payments in case you are unable to repay on time. Understand that all this information goes to your credit history which can work at your disadvantage in the future.
How to improve your credit score
The first principle about managing your finances is to ensure that you live within your means. Save up every time you get a paycheck to allow you to have an emergency fund. It is not always possible to avoid taking up loans and if this is the case, ensure that you work with a reputable lender. Make sure that you understand all the terms of the loan before signing up. In case there are terms that you don’t understand in the loans agreement contract, have the lender explain them to you in a way you can understand.
In case you already have a bad credit, try cutting back on your expenses and focus on improving your credit score. Pay up all outstanding debts with time to help improve your credit score. You can always approach your lender and agree on terms that will allow you to pay back your loan without too much strain. Only apply for title loans in case of emergencies.