Borrowers with a good credit score can enjoy the privilege of obtaining a loan from a licensed moneylender in Singapore without much hassle. Everyone tries to improve their credit scores by paying their utility bills and credit card bills on time. At times, some people get stuck in financial crises and find it difficult to pay their loans and debts on time. The delay in payments can impact your credit score negatively.
The last thing you want is to have your loan application declined because of your bad credit score. There are many ways to boost and improve your credit history. However, if you want to accelerate the process of building a better credit history, instalment loans are the solution.
Instalment Loans: The Credit-Builder
Many credit-builder loans allow users to improve their credit scores by paying their debts and interest on time. Most credit bureaus check your loan history to grade your credit report. As such, it is apparent to opt for a monthly instalment loan in Singapore or any other related credit-builder loan to improve your credit report.
As the name implies, the borrower has to pay the loan amount in equal payments over a specific period until the full payment is completed. The main difference between the instalment account and your revolving credit is that the monthly payment amount in the latter is not associated with an equal payment or a set period.
Does Instalment Loans Affect Credit?
Instalment loans can positively affect your credit score in the following cases:
• The Payment is Made on Time: If the borrower pays the decided amount on the given date regularly, there will be a high chance for the credit score to improve. This happens when you pay your credit on time, and the lender reports your punctuality to the credit bureau. There is no denying that credit payment is the major deciding factor for your credit score. The sooner you pay your debts, the higher your credit score will be.
At the same time, delay in payment (which exceeds 30 days) can result in a drop to your credit score. If you lose your property or collateral to foreclosure, your credit score will be as good as dead.
• Diversify Your Credit: Another factor that decides your credit score is credit diversification. If you only possess credit cards, you may want to consider diversifying your credit portfolio by opting for instalment loans.
Are Instalment Loans Worth It?
If you are interested in building your credit profile and do not have any credit or existing loan to help you, instalment loans are the best solution. Instalment loan works as the credit-builder loan that gives a boost to your credit score and improves the overall credit profile. However, this loan is only worth it when you are able to pay back the loan on time. You definitely do not want to lower your credit rank by delaying the loan repayment.
Once you have applied for an instalment loan, use credit reports to check the changes in your credit score.