Money Tip Monday- Credit Tip!!!!!!

If you are like me, at some point at the beginning of your adult life, you found a way to mess up your credit by falling into the credit card trap. If you didn't, you were ahead of the curve. On my road back to Financial Independence, I discovered a simple way to rebuild my word and my credit: Collateral Loans.

A collateral loan is a loan from a bank using your own money as collateral. A bank will be willing to allow you to borrow money if they know they have a way to get the funds back in case you do not pay. It is a win win for any financial institution. First, if you do not have funds deposited in a bank already, I suggest putting $1K-$2K in a savings account. Go to your bank and ask for a collateral loan based on what you have saved. They will ask what length of time you want to pay it back. Put anywhere from 12-24 months. You can generally borrow this money at a much lower rate because it is backed up by your own funds.

Once you have access to the funds, either put the money in another account, or somewhere that you know you will not be tempted to spend it. Pay the monthly amounts due for 4-5 months without being late, from the actual money that you received. In the sixth month, pay the loan in full. This will establish a good payment history, as well as a paid in full loan.

This loan will be reflected on your credit. It will not show that it was backed by collateral. It will only show that you had a good payment history with a bank, and you paid off a loan. If you do this 3-4 times, you will put yourself back in a position to establish your credit and your word.