Too much debt and bad credit are a vicious circle. Bad credit occurs when your loan or debt gets out of hand and you experience trouble making payments. Getting out of debt can be extremely difficult when you have bad credit and no money. Cases of bad credit are common, and when you are in such a situation, it may seem like there are no options but to find a way to pay what you owe with the hope that your credit limit will improve after that.
However, with sound financial advice, you can navigate this difficult point in your life. What you need are feasible options for obtaining debt relief. The good news is that the solution to get out of debt or reduce what you owe will not attract a lot of fees and interest. More importantly, implementing these solutions will not result in more debt. You’d be surprised to learn that these choices have the potential to improve your credit limit.
Most financial advisers fail to mention that the option you select should depend on your financial situation. That is why this article is the best resource for all your financial advice needs if you have bad credit. The best options for reducing debt include securing debt consolidation loans, credit card balance transfers, for-profit debt settlement, and debt management plans.
At this point, you are probably acquainted with the implications of bad credit-increased interest rates on home, auto, and car loans and higher deposits for utilities and housing. You can only navigate these challenges by trying to learn more about debt consolidation and keep your head above the water by gaining sound financial advice and implementing it aggressively.
With that in mind, managing your debt can be challenging, especially if you have poor credit. But, there are things you can do to improve your finances.
You can take control of your finances by creating a budget and reducing expenses. This may not sound too appealing, but it’s the first step to getting out of bad credit. Eliminate unnecessary costs and put aside funds to cater to your bills on time. Part of these funds should be directed towards reducing your debt by making small payments. Any financial advice that tells you that there is a credit solution strategy that works without implementing this as the initial step is highly inaccurate and should be disregarded.
Communicate With Lenders
The next step is to establish constant communication with your credit union or bank. If you have an active saving or checking account, you have a relationship with your bank. Maintaining regular contact with them will increase your chances of securing a personal or debt consolidation loan; however, before accepting either one of these options, you need to make sure that their interest rate is reasonable. We strongly advise that you join a credit union if you haven’t already because, as non-profits, they have lower fees and interest.
Find a “Friendly” Loan
There is also the option of borrowing from friends or family. Depending on your circumstances, this can be an excellent idea or a bad one. There are many chances that a friend or family member may not charge interest on a loan. Furthermore, you can be flexible in your repayment.
The downside of this option is that existing relationship and attachment issues between you and your selected family member or friend may generate problems that you did not anticipate. Such challenges are non-existent with traditional lenders.
According to the Consumer Financial Protection Bureau (CFPB), a debt consolidation loan is a form of loan that combines several of your debts into a single loan that can be settled with one repayment. This loan enables you to pay all your debts with a single offering. It makes your loan repayment process more convenient.
This type of credit can be beneficial when dealing with debt collection agencies or multiple lenders who are all on your neck at the same time. Try to picture yourself in the middle of five different debt collection agencies that call and text your phone now and then. Even if you have a solid plan for repaying the money, the stress and agitation resulting from all that pressure might undermine your thinking and ability to act strategically.
A debt consolidation loan comes in handy in such an event when your bank decides to pay off your creditors and charges you for the entire amount in a single loan.
There are several options for a debt consolidation loan one that one can choose from. We have capitalized on extensive research and our knowledge of bad credit to deliver the most feasible alternatives for this type of loan. These options include:
Debt Settlement Program: You will pay less than you owe by registering with this program. It, however, comes with the implication of up to seven years of a negative credit review. If you are not looking to borrow any money in the near future due to the challenges you encountered while settling your current loan, then a debt settlement program is the way to go.
Debt Management Program: When in debt, and particularly in a situation involving a substantial amount of money, anyone would feel relaxed and less stressed out when they have the support of a well-established and reputable partner. Such a partner usually constitutes a not-for-profit credit counseling agency when you enroll in a debt management program.
The primary aim of this program is to assist you in drafting a budget that will facilitate your debt repayment. They will also discuss other feasible options with you, with the most common one being a debt management plan. People often misunderstand the intentions of a debt management program, with the majority thinking that it provides you with a temporary loan to help clear your debts. What this program actually does is that it reduces your monthly payments and lowers your interest rates while at the same time delivering credit counseling that will help you in the long term.
If you find yourself in dire need of instant cash to settle your debt, peer-to-peer lending is the way. By enrolling in this program, you will be matched by investors willing to take a risk and help you settle your debt instantly. The main advantage of this option is that standards may be lower and less stringent than those of traditional lenders. However, the bad news is that their interest rates are incredibly high, with some even charging as high as 35%.
This might seem like a wrong choice, but when you reach a point where your creditors are legally allowed to garnish your property or your wages, then peer-to-peer lending might be your only feasible option. Should you decide to utilize this alternative, we advise that you use the services of companies like Avant, Prosper, or Upstart.
It Can Be Done
Bad credit can be a nightmare for anyone. With the world economy experiencing unprecedented and adverse changes, there is no telling when you might need a loan to establish your business, support your livelihood or expand your education. However, securing debt from a recognized financial institution can be problematic with bad credit.
That is why you need a robust plan for settling your overdue debts to avoid going further down the drain. This article has provided several options in this regard. You should remember that the alternative chosen should resonate well with your financial position.