You can go through all the circles of hell trying to build credit. Lenders don't want to approve you as your credit score is too low. A good idea may be to get a loan to increase your FICO score and build up a credit!

This can be frustrating. But there is good news. There are other ways to build your credit, including taking out an Installment Loan or a Personal Loan. But how does that help? What kind of loan works better? The answers to these questions you can get below.

What is an Installment Loan?

Installment loan is the exact amount of money to borrow. This amount is paid back for a certain number of months, plus interest. These can be private loans (such as mortgages) or federal loans (such as some student loans).

Installment loans can help build credit because you show financial responsibility when you pay them back on time. Full payment on time is a huge credit boost because the payment history is 35% of your FICO score.

Another plus is that installment loans have longer repayment periods. For example, if you rent your car, you can make monthly payments for about three to five years.

Is Installment Loan a good idea?

Although installment loans are easy to obtain, but don’t forget about the disadvantages. If you miss one payment, it will damage your credit report. So don't take this loan unless you don’t have a steady income to repay the loan every month.

Must know!
Always remember about the interest when you’re paying back your installment loan!

For example, you take a loan of $ 1,000. The interest rate is 15.00%, maturity period is one year. Your monthly payments will be about $ 95. You’ll pay $1,150 in total. So you spend an extra $ 150 to borrow $ 1,000.

What is a Personal Loan?

A Personal Loan can be a type of installment loan. You can take out a personal loan from a bank, credit union or other lender. You will pay back this loan with interest for a certain number of months. This type of loan you can use for almost anything.

For example, you need to pay off a big part of debt, taking a personal Installment Loan. With a Personal Loan, you’ll pay less in interest.

You should also be aware of the existence of a Personal Loan with one payment. That is, you take a lump sum of money and repay it all at once with interest included.

Is Personal Loan a bad idea?

If you are fast paying off debt with high interest personal loans are a great option for you. But they are not for everyone!

Payday Loan is a type of one-time payment Personal Loan. Before you take this loan, make sure you are able to repay the loan with interest during your next payday payment.

Getting a payday loan can put you deeper into a debt hole if you fail to pay off it on time at the end of the loan term. Not to lose your money compare the best lenders online with the cheapest rates.


Rates last updated December 2nd, 2022


Rates last updated December 2nd, 2022

Will an Installment Loan or Personal Loan help your credit?

Installment Loans and Personal Loans will help you build credit. This is a great way to improve your credit rating. Even if you had a bad credit score before. It can take three to six months to start building credit. But it can set a strong foundation for your credit report.

Personal loans are great for getting rid of big debt by eliminating or reducing accounts with high interest rates. You can consolidate your debt. This will allow you to receive one managed monthly payment with one low interest rate.

You can choose the best loan depending on your situation.

Must know!
Can an installment loan or personal loan help your credit when you want to build it up? Yes. The type of loan you choose should depend on where you are on your credit trip.
  • If you're at the beginning, a small installment loan can help you get on the right track. At this time you will make your payments every month. If you need to consolidate your debt or pay off high interest debts in a shorter period, you can take out a larger personal loan.
  • Always look at the fine print! It doesn't depend on which loan option you choose. View term limits, loan options, and lenders. As long as you are responsible and aware of your loans, you can build credit.