In the event that you are someone with a lot of debts on his or her hands, then it is important for you to get that loan repaid as quickly as you can. One of the most pressing issues of our times is how many young people along with their older counterparts are facing debt-related problems. These debts financially burden people and often can stall them from having a healthy lifestyle. One of the most effective ways of repaying a debt is by using the debt consolidation loans method. However, there are a lot of people who are unable to get these consolidation loans because they have bad debts. In this article, you will learn about some alternative ways to repay your debts other than by using debt consolidation methods.
The credit score is important
As you are probably aware that a debt consolidation loan is basically a type of personal loan which will enable you to repay all your different types of debts, including your medical, student, college and credit loans. These loans get paid back by one single monthly payment for about a period of two to five years. Asides from these this form of loan repayment will also help you to lower the rate of interest that you have incurred and lower it substantially. People who do not have a good credit score and are under 660 can also at times qualify for the debt consolidation loans although their rate of interest would be extremely high. There can be some instances when these rates are around 30 percent of the principal amount. A lot of people choose debt consolidation methods because it lowers their rate of interest, but when you have to pay such a high amount of interest amount, then it will not make any sense to go for such a system of loan repayment. Thus, for people who have a bad credit score, they should consider some of the other modes of loan repayments before going for a debt consolidation loan.
IT is crucial that you check what your credit score is first before opting for any type of loan. This will come in handy and allow you to negotiate better your loan repayment particulars.
Advantages of debt consolidation loans
The main advantage of the debt consolidation loan is that it will allow you to repay loan amounts that have a high rate of interest quite efficiently and effectively without you having to make too much spending on the interest amount. These loans would lower your rate of interest considerably, and that will end up saving a lot of your money. There are multiple types of loans which charge high-interest rates like short term loans, home equity loans, credit card debts and so on. However, when someone does not have a good credit score to support him or her, then using a debt consolidation loan will make basically no sense for them because they may have to pay a lot of money in the form of interest rates.
It is thus important to learn about the different methods which are still available to people who have bad credit scores and are in requirement of a debt repayment solution.
- Debt management plans – Debt management plans are quite effective and also easy to follow for a lot of people. These plans are primarily provided by the credit card and debt consolidation agencies. These are also often called non-profit credit counseling. These methods restrict your spending and thus enable you to save money which you can direct towards the payment of your loans. In a debt management plan, you will find all of your credit cards to be closed off. The agency which you hire will find a way for negotiating your rates of interest and would strive to make it as low as possible, and after that, they would be offering you a plan for repayment. This will be done with all the accounts that you have simultaneously. You will be required to pay a monthly fixed payment to your agency, and this would then get dispersed with your creditors.
A primary advantage of such a form of the debt management program is the fact that you would not be required to have a perfect credit score. You must understand that in this type of plans, your credit score will not be important at all and would not be looked at or considered. Your credit reports will also show that you are undergoing a debt management plan and this will prevent you from getting any form of new credits till the time you have repaid all your earlier and previous dues. Besides this, unlike a debt consolidation loan, this is a form of debt management scheme which you would be able to do all by yourself. All you have to do is call your creditors and ask them to close off your accounts. You need to explain to them the financial situation which you are in and then ask them to negotiate your rate of interest down and then help in setting up a play for monthly loan repayments. As mentioned before, the most useful feature of this debt management plans is that it will allow you to access this feature even without having a solid credit score.
- Taking a home equity loan – You can consider taking a home equity loan to help you in your endeavor of repaying your debts. These types of loans will provide you with a lower rate of interest than what you would get from debt consolidation programs. But one of the main issues with this system is that you would be required to have a good credit score and history in order to be eligible for these types of loans. You should be having at least a minimum of 660 in your credit score so that you can access these loans. But you must understand that it is also quite cheap and as an option for debt relief it will provide you with a loan that will have low interests. There are a lot of people who would prefer to use the money that they get from their home equity loans in order to repay their debts. Some of the main advantages of having home equity are that you will have a lower rate of interest compared to debt consolidation loans when the term for the repayment is long like in between five to seven years. The interest amounts which you are paying can also be tax deductible, and you will be paying low monthly payments because the term for the payment is long. It is important to remember that you can risk turning your home into an unsecured debt risk if you are not able to make your loan repayments on time when you are on a home equity loan. Thus, you must always try to repay your monthly installments on time.
One of the essential aspects of following any type of debt settlement program is to learn the art of budgeting. You need to set up and follow a strict budget on a monthly and even weekly basis to ensure that you are able to save up the amount of money which you need to repay every month.
- Cash Refinance – Cash refinancing is something that people with low credit scores can also apply for. The main advantage of this system is that you will be able to get a low rate of interest. This system is effective when you do not have too high an amount in your debts.
- Bankruptcy – Filing for bankruptcy is something that nobody likes, and it will put a dent of your credit records and your credit score. But this is one mode of debt settlement which a lot of business owners use when they have no other way of coming out of their financial problems.
No matter which type of program you opt to take, you will have to be disciplined and ensure that you are following the program rigorously so that you can repay your debts on time. Having a debt consolidation plan is effective, but it is not the only way that you can repay your debts. You need to find out what your credit scores are and which programs for debt settlement do you actually qualify for.
If you want to learn more about the different ways by which you can repay your debts, you must visit Nationaldebtrelief.com and get all your queries answered by the leading professionals in the debt management industry.
Wrapping things up
Debt consolidation loans are quite effective forms of debt repayment and debt settlement programs. However, a lot of people may not be eligible for this program because they have poor credit scores. Thankfully, for them there exist other alternative programs to allow them to become financially free. Hopefully, the information mentioned in this article would have helped you.