Those who are willing to get out of debt or make their budget more manageable have probably considered a debt loan. Basically this takes your current loans and combines them into one more manageable loan. While it may not necessarily make your payments lower each month, at least your money will go to one place and you may have a clearer end date instead of multiple debts that never seem to go away.
It’s a great way for people with bad credit to help improve their finances and get their budget back on track. This is a great way to pay off your debts and work towards debt free. So what are your bad loan loan options?
How to qualify
Most people with bad credit fear that they will not be approved for future loans. When your car breaks down and it’s time to get a new loan or your family is expanding and you need a bigger home, worrying about getting that loan approved is stressful.
The same applies to those who simply want to get their debt under control and need a debt loan to do so. Sometimes even helping yourself can be difficult to achieve because you are trying to get approved for another loan due to your bad credit situation. Here is what you need to know.
Debt loan companies vs. Banks
While most people go through a bank to get a loan, you can always go through a debt company. Banks and credit unions often have strict criteria when someone applies for a loan and generally only approve the highest credit applicants.
If the bank rejects it, look at a debt company. They are designed to help those with the worst credit get the loan they need. Do your research, as there are many companies that are not trustworthy.
Make sure you are working with a legitimate company and not falling for a scam. You don’t want a company that doesn’t review your financial situation, offer you government money to erase your debt, or try to charge you up-front fees.
Those who get approved for their loans should be careful, bad debt loans generally carry a higher interest rate. While this means that it may take longer to pay off the loan and the loan may cost you more in the end, at least you are getting out of debt and getting approved for something. Although the loan will have a longer term, you can always work to pay it off sooner if your income increases in the future.
Improve your credit score
One thing to keep in mind is that you can work to improve your credit score before applying for a loan. This means regularly monitoring your score to make sure you’re improving and not taking a hit. Making all your payments on time will help your score. Another way to improve your score is to pay off debt, including past-due debt and credit cards. Avoid opening new accounts during this time.
Other options
If you can’t find a good debt loan, try a debt management plan or debt settlement company. Debt management plans are offered through debt relief services designed to help you pay off your debt within five years. You may get a lower interest rate through them than you are currently paying to your existing creditors.
Debt settlement means that you will make monthly payments to a debt settlement provider. Payments go to an escrow account, while the provider works with your creditors for a lower settlement of the remaining outstanding debt you owe.
Once an agreement is reached, they will take the funds you have deposited and pay the creditors. This is a good step to avoid bankruptcy, for those who cannot pay their current monthly payments and are looking to get out of debt.
Instead of filing for bankruptcy, which will stay on your record for up to 10 years, there are ways to better manage your debt. Try a debt loan through a bank or other lender, debt settlement, or a debt management plan.
