Those ready to get out of debt or to make their budget more manageable have probably considered a debt loan. This basically 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 is going to one place and may have a clearer end date rather than various debts that never seem to go away.
It’s a great way for those with bad credit to help improve their finances and get their budget back on track. This is a great way to get your debts paid off and work towards becoming debt-free. So what are the options for bad credit debt loans?
How to Qualify
Most people with bad credit fear they will not be approved for future loans. When the car breaks down and it’s time to get a new loan or your family is expanding and you are in need of a bigger home, it’s stressful to worry about getting approved for that loan.
The same applies for those that 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 with 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 typically have stricter criteria when someone applies for a loan and usually only approve higher credit applicants.
If you are turned down by the bank, look into a debt company. They are set up to help those with worse credit get the loan they need. Do your research as there are many companies out there that are not trustworthy.
Make sure you are working with a legitimate company and you do not fall for a scam. You don’t want a company that doesn’t review your financial situation, offers you government money to erase your debt or tries to charge you up-front fees.
Those that get approved for their loans should beware, typically bad credit debt loans comes with higher interest. While this means 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. While 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, you can work on improving your credit score before applying for a loan. This means regularly monitoring your score to make sure its improving and not taking any hits. Making all your payments on time will help your score. Another way to improve your score is to pay down debt including any past due debts and credit cards. Avoid opening any new accounts during this time.
If you can’t find a good debt loan, try a debt management plan or a debt settlement company. Debt management plans are offered by debt relief services designed to help you pay down your debt within five years. You may get a lower interest rate through them than you’re currently paying to your existing creditors.
Debt settlement means you’ll make monthly payments to a debt settlement provider. The payments go to an escrow account, while the provider works with your creditors for a lower settlement on the remaining outstanding debt you owe.
Once an agreement is made, they’ll take the funds you’ve deposited and pay the creditors. This is a good step to avoid bankruptcy, for those not able to afford their current monthly payments, and looking to get out of debt.
Rather than filing for a bankruptcy, which will be 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.