One of the things that concern some borrowers the most is their credit score. To banks and most lenders, credit score is your overall worthiness of receiving a loan so it is unsurprising for the subject of credit score to be brought up when the need for a title loan arises.
Admittedly, it can be a bit of challenge at times to find dependable ways to secure money when your credit score is on the low side. In fact, a lot of people need to work on improving their credit score before actually qualifying for a loan. The interesting bit about this predicament is that improving your credit score can also be done by borrowing money. The caveat? Meeting your obligation of paying it off regularly and right on time.
The Finer Details of Your Credit Score
While your overall credit score is broken down in the several components, there is one aspect there that is influenced by your record of payment histories. The other components of your credit score is based on credit utilization, credit history duration, any new credits, etc. Many lenders typically look at your payment history over the other components because this gives them a better picture of whether or not you are a financially responsible person, payment-wise. It won’t matter if you have only begun building up credit three years ago, or you have high or very low credit utilization – it will be your payment history that will matter because it tells lenders about your patterns as well as the probability that you will make good on your payments when you choose to loan money from them.
Once you have a title loan, the monthly installment payments that you need to fulfill will also have a large impact on your current payment history – even if a title loan does not seem as sizable as other types of loans. Making good on your commitment to pay title loans on time every time will ensure that your payment history will remain as smooth as possible, even if you have already made lots of loans in the past. The better your performance is in this particular area, the more significant your score will improve and you will end up with a more positive credit report.
Having Bad Credit
It is still possible to get a title loan even when your credit is less than stellar, allowing you the opportunity to turn things around. Title loans are some of the fairest opportunities around because it does not allow something like a sub-prime score keep you from being approved, unlike other systems such as housing agreements, credit cards, and many types of traditional loans. Again, if the monthly payments are made on-time as dictated in your repayment schedule, then your score and your credit report should improve significantly.
On the flip side, applying for a title loan and not being able to make the necessary monthly payments can actually hurt your credit. Failing to pay on time will incur penalties and fees, causing the monthly payable to swell up. This slip will also be recorded in your payment history, worsening your credit in the long run. As such, it is very important to map out your plan for paying back your title loan within the given time frame so that your credit score will slowly but surely improve over time.
Simple Suggestions to Meet Payments
By this point, it should already be very clear that the payments you need to make will have a large and very direct impact on your credit rating through your payment history. Staying faithful to the repayment schedule is of utmost importance then. Here are some tips that you might want to consider when making the monthly payments:
1. Determine a realistic monthly payment that you can actually meet. Some people think that whatever amount the lenders compute for your monthly payment will be the rule of law, no questions asked. The truth is that the monthly amount is to be decided on a number of factors, including your capacity to meet such a figure. As much as possible, lenders aim to arrive at an amount that will be manageable for their borrowers because they want the latter to fulfill their end of the deal. If you feel that the amount that was presented to you is a bit too high considering your monthly financial responsibilities, always ask for a re-computation. The payment period may be extended, allowing the monthly average to become smaller so it is more manageable for you.
2. Weigh whether the interest rate for a longer period is better or worse for you compared to making a supreme effort to meet higher amounts each month. On the flip side, some people prefer to just find more ways to make money and cut back each month to meet a monthly payment that is just a little bit higher than their usual budget. Their reasoning? Better to scrimp and save for a few months than incur and pay for higher fees with an extended payment period. If you feel very strongly about your capability to gather the funds needed to meet slightly higher payments just so your overall interest rates are kept to a minimum, go for it! Just be sure that you decide on the best option based on your current financial status.
3. Automate your payments so you never miss a deadline. Many lenders have the option of working with your bank payroll account to automatically deduct the payment from your account when your salary comes in. For people who are forgetful or need a strict method to help stick to their budget will find this suggestion to be a very useful one, because the task of remembering to meet their deadline is no longer in their hands thanks to automation. At the same time, when the amount is automatically deducted from their account total they have no other choice but to make do with what’s left after the loan payment has been prioritized.
4. Avoid frivolous spending and just stick to the basics. Food, water, electricity and gas – those should be the main priorities that you will spend your money on for the duration of your loan payment schedule. This is to ensure that you are able to meet the payments on time, with the necessary amount. Tightening your belt will not mean forever, so take comfort in the fact that you can have a nice dinner at that new restaurant you’ve been eyeing as soon as you are debt-free.
5. Look for ways to generate more money to shorten the payment period, and pay back the loan a lot more quickly.When you get an unexpected amount of money or when you make a small amount from a freelancing gig, put that money towards the payment of your loan. It might be tempting to use that small amount to buy that pair of shoes you are eyeing (after all, you have already automated your monthly payments by designating a small part of your monthly wage for it) – but it’s so much better to just use that to make your payables smaller and the payment schedule a lot shorter. There’s nothing quite like peace of mind knowing that you are almost finished with the responsibility of paying back a title loan.
Sticking to these tips will really help ensure that you are able to meet your monthly payments for your title loans. In turn, fulfilling your responsibility of meeting payments will mean improving on your credit score because your payment history will reflect your capability to meet the agreed upon terms. You might ask how you can make your credit report reflect your dutiful payments, and the answer is that usually the lenders themselves will be the ones to report your good performance so that the necessary adjustments can be reflected on your credit rating. All the same, you can also ensure that you inquire about this bit with them so if it is not an automatic action then they can see to it that they do once the last payment is in and you are given back your title used for the loan. You will be in a much better position to get another loan if you should wish, and if you stick to the payment periods again then you can be sure that your credit rating should better.