Rebuilding Bad Credit - How A Secured Credit Card Can Help
A low credit score can raise the cost of borrowing and make it difficult to manage your monthly payments. Fortunately, there are ways of alleviating your financial stress.
Whether it be personal loans, credit cards, or bad credit student loans, there’s a variety of lending products in the market that can help you consolidate and pay down your outstanding debts. Let’s take a look at each of these in further detail.
The Link Between Debt Problems And Bad Credit
It’s important to recognize that there’s a direct relationship between low credit scores and unaffordable borrowing.
- The better your credit, the lower your interest rate will be. This means that customers who manage their monthly payments responsibly are likely to enjoy higher scores and more affordable loans
- If you have a bad credit score, you may experience the very opposite effect. High APRs and interest rates make your installments too expensive and increase the probability of defaulting and late payments
If you find yourself experiencing the latter, you’ll want to stop the negative debt spiral in its tracks. One of the best ways to do this is to seek out financing options with low APRs and consolidate your expensive debt.
Five Ways To Ease Your Debt Burden With Bad Credit
To help you reduce your arrears, we’ve put together a list of five bad credit-friendly lending options that you’ll want to investigate to improve your finances.
Banks And Credit Unions
Big banks don’t have a reputation for offering bad credit customers the best possible deals. However, if you have a long track record with your financial institution, then it may be able to offer you a favorable interest rate.
Credit unions are usually a better alternative for low FICO score customers. This is because they tend to be community-based and rely on their reputation for customer service to attract new members.
As a member of the credit union, you’ll be more than just a number. Therefore, the loan officer will be more motivated to provide you with a funding solution that suits your needs and circumstances.
Debt Consolidation Loans
This type of financing product is ideal for borrowers who find themselves struggling to meet their monthly arrear repayments.
- If you currently have one or more credit accounts with high APRs, you may be paying more interest than necessary
- A debt consolidation loan will let you pay off multiple accounts and credit cards by converting the total amount you owe two a single low-APR loan that you can pay down in regular monthly installments
Credit Cards
If you’d prefer to keep the functionality of a credit card while saving on payments you may want to consider a balance transfer card as an alternative debt relief strategy.
- Like a consolidation loan, a card of this kind will allow you to transfer your existing arrears and pay a lesser APR. This translates into monthly savings on your monthly installment
- Another way to save significantly on your financing charges is to apply for a card with an initial interest-free period. If you transfer your entire credit balance and pay it down at 0% interest, you won’t incur any further interest charges
Loans From Friends And Loved Ones
Asking a friend or relative for an emergency loan doesn’t have to be awkward. Treat it as a business transaction and lay down the ground rules early on.
- Setting a repayment schedule is essential when you ask someone you know personally to lend you money. You could offer to start payments in six months or a year from now. You could also begin paying them back when you change jobs or graduate from college
Bad Credit Personal Loans
One of the easiest ways to save on monthly credit payments is to opt for a bad credit loan with a competitive APR. You’ll benefit from lower monthly lending costs as well as quick approval times and a fully online application process.
- Shop around to find the right lender. You’ll want to assess each loan company carefully in terms of the loan amounts it offers, its APRs, and the repayment periods (loan terms) associated with the specific lending products you’re interested in
Escaping The Debt Cycle: How To Manage Your Credit Accounts Like A Pro
After you refinance your debt and pay it down, you’ll want to keep moving in a positive financial direction. Keep the following in mind:
- Your credit score is determined by several factors, including your credit balances, payment history, the age of your credit accounts, and how many types of credit you currently use
- You can raise your numbers by simply making on-time payments and keeping your card balances below 30% of your credit limit. You’ll also want to avoid negative events like defaults, late payments, and bankruptcy
Conclusion
Expensive monthly payments don’t need to become your new normal. By consolidating your debt and exploring the options listed above, you can secure an affordable APR and start paying down your outstanding balance.
