If you’re considering applying for a title loan in the Beehive State, you probably have bad credit. Planning to take out a loan with relatively high interest can be a scary proposition since you already have old financial problems to contend with.
However, title loans in Utah can help borrowers regain good financial standing over time. These untraditional loans are not the ideal credit-rebuilding tools out there, but they work nevertheless. Here are the different reasons they can positively affect your credit score.
You Won’t Lower Your Credit Score by Applying
Generally, title loan applications don’t trigger a hard inquiry, which occurs whenever an institution performs a credit evaluation to make a lending decision. Also known as a hard pull, it will negatively affect, albeit slightly, your credit score and appear on your report for 24 months.
Title loan lenders don’t look for stellar credit. They, however, run a background check in the spirit of responsible lending. Reputable lenders do this to avoid fraud and protect the owner of the vehicle. A background check results in a soft inquiry, but it doesn’t negatively impact your credit score at all.
You Can Consolidate Your Other Debts
A generous lender may allow you to borrow up to half of your vehicle’s wholesale value. Compared to the cash you can receive from a typical cash advance, a title loan payout is usually much larger. While you can use the sum for whatever purpose, you can strategically execute debt consolidation with it.
If you have several loans with different interest rates and balances, you can employ several techniques to pay your debts faster. The “Avalanche Approach” preaches that you list your debts by interest rates from highest to lowest. With this strategy, you pay minimums on all except the debt with the greatest interest rate to scratch it off the list soonest.
This approach doesn’t work on some people, however, because they can get easily overwhelmed. A good alternative is the “Snowball Method” where you list your debts according to balance. When you go this route, you pay minimums on all debts except for the one with the lowest balance. With this strategy, you can develop a healthy debt-paying habit by winning small battles first. A dopamine rush makes it fulfilling to take care of your financial obligations you can eliminate more debts quickly with less money.
No repayment strategy is right for every borrower. Also, not all cash sources are suitable for debt consolidation. Assess your situation to determine the right strategy and see whether a title loan is the best direction to take.
You Might Improve Your Credit With Good Payment History
Some title loan lenders might help you build your credit through punctual payments. Increasing your credit score as you repay your loan on time is a positive reinforcement that benefits all parties.
Secured short-term loans can be advantageous if you do nothing less than your part. Although you may currently have bad credit, use title loans now so that you would no longer have to in the future.