It’s true. Taking out small loans to build credit works. But not all loans can help you through the process of credit building. Don’t rush into the process by accepting the first loan you see.
Oftentimes, those will be payday loans, which are predatory, expensive, and harmful for your credit. Find out how to get fast small loans to build credit without putting your credit score in harm’s way!
What are fast small loans?
Most of the small loans that you can get very quickly are payday loans. These loans are commonly advertised in storefronts. They are quick and accessible, but these loans are also usually predatory and expensive.
They are high-interest and short-term. Payday loans are also predatory because people usually cannot pay them off in time, so they’ll take out another loan to cover the original loan. This creates a cycle of debt for those who take out payday loans, so make sure you read the fine print before applying for a loan like that.
Why are fast small loans so popular?
Fast and small loans, like payday loans, are so popular because they often don’t require a credit check. This is appealing to people who are already in debt because they often have poor credit, which would otherwise disqualify them from obtaining a loan in the first place.
Payday loans are also popular because they are very quick and convenient. For instance, in many neighborhoods, payday loan stores are on every corner. The process just takes minutes because there is no credit check. Finally, these loans are popular because panicked people often rush and don’t seek out other options.
Lending criteria for a small personal loan
Let’s look at the lending criteria for payday loans and traditional personal loans. This way, you can compare the process of each type of loan. You have more options than you may think!
Payday loan criteria
Here is the process of securing a payday loan. This way, you can understand what you will be handing over to a payday loan company.
- Payday loans come with a simple application process. There are no credit checks necessary when you apply for a payday loan, too.
- You’ll have to provide the payday loan company with access to your bank account. They’ll be able to tell when your regular paychecks are deposited.
- From there, you will sign a document detailing the terms for a high-interest loan. It will always require a quick repayment, which is part of the predatory aspect of these loans.
- Payday loan companies will often ask for a post-dated check with payment in addition to the interest that the loan accrued. This way, they can cash their check from you as soon as you get paid.
- As such, your payment towards the loan will typically coincide with your payday. That’s where payday loans get their name after all.
- From there, you’ll either pay off the loan or fall into the trap of the debt cycle by only paying interest, keeping the loan open and accruing even more interest.
Traditional personal loan
Traditional personal loans often come with more defined criteria that you must meet in order to qualify. We’ve outlined what to expect below!
- Credit score and payment history. Your credit score represents your ability to pay off debt, the amount of debt you have, and your financial history. This is the most essential part of the loan application. Typically, lenders require a credit score over 600, but that isn’t always the case, and you might be able to get a loan without any credit history at all.
- Income. You will need to prove that you have a steady stream of income. This can be proved by submitting your pay stubs or sharing your tax documents with the lender. Proof of income will show the lender that you have the means to repay your loan.
- Debt-to-income ratio. Lenders for traditional personal loans will look at your debt-to-income ratio. Each lender’s requirements will differ, but essentially, lenders want to see that your debt doesn’t outweigh your income.
- Collateral. Traditional lenders will ask you to list any and all forms of collateral on your application. Collateral is what you’ll pledge with your loan in the event that you can’t repay it. If you can’t pay back your loan, a valuable asset, like a car, home, or other form of investment, will be taken from you as collateral.
- Origination fees. You will have to pay an origination fee when you obtain a loan. An origination fee is basically an application fee.
Where can I get a fast small loan?
Payday loans aren’t your only option. There are many places to get a small loan!
- Get a loan from your credit union.
- Pawn something at the local pawn shop.
- Borrow money from a friend or a family member.
- Become an authorized user on someone else’s credit card.
- Obtain a secure credit card.
- Get a Credit Builder loan from MoneyLion.
What is a credit builder loan?
In general, a credit builder loan is a small loan to boost credit. In other words, it’s a loan that is designed to display your financial consistency, and the lender will report your progress to the three major credit bureaus.
Where can I find a credit builder loan
MoneyLion offers Credit Builder loans, which come with additional features. The loan will put you back on track so that you can make big financial gains.
Low-cost MoneyLion Credit Builder loans
MoneyLion’s Credit Builder Plus membership makes it easy to get a low-cost loan, giving you access to quick cash. It’s simple! Just apply for a loan of up to $1,000.
Then, pay off your loan over the next twelve months. You’ll build credit every time you make a payment on time. Once you pay it off, you’ll receive the rest of the money while getting to enjoy the benefits of an improved credit score.
No hard credit check
MoneyLion does not run a hard credit check. You’ll only have to submit access to an established banking account with evidence of an income stream.
MoneyLion’s Credit Builder loan offers same-day approval. Get started now.
Monthly credit reporting
For every month that you make a payment on time, we’ll report the good news via monthly credit reporting to the three major credit reporting bureaus. This is where the credit building happens.
Financial suite tools
Besides the credit builder loan, you will also have access to MoneyLion’s financial suite of tools. These include features like a spend tracker, the Financial Heartbeat too, Instacash, investing accounts, and the Safety Net feature.
How much can I borrow with a MoneyLion Credit Builder Loan?
It depends. We look at several factors when we determine how much you can get in the form of a loan. Need money now? Instacash is a great supplement when it comes to obtaining more money, especially if you need money now.
Can I borrow more money in the future?
It may feel like you need two loans at once, but that isn’t always the case. You can apply for another MoneyLion Credit Builder loan once you pay off your existing loan!
Build credit the right way with MoneyLion
Stop using payday loans. Instead, build credit the right way with MoneyLion. Our Credit Builder Plus membership isn’t predatory, meaning you won’t feel pressured to pay it back as soon as you take it out. Start working towards a better credit score today with MoneyLion!
Do small personal loans help your credit?
Yes! Any consistent on-time payments that you make towards your personal loans can help you build your credit score.
Can you get a credit builder loan with bad credit?
MoneyLion offers a credit builder loan without performing hard credit checks. Check it out.
Does a loan negatively affect your credit score?
It depends. If you don’t pay back the loan on time in accordance with the loan’s terms, then it can negatively affect your credit score. Steer clear of payday loans because they are far more likely to create a cycle of debt.