Credit is used by millions of people around the world each and every day to overcome a range of financial challenges. From smaller payday loans to help you tackle life’s little emergencies through to larger debts to assist with property purchases, credit now plays a huge part in almost every area of society.
However, should your financial situation change or you become unable to repay your debts for whatever reason, they can quickly become overwhelming if you don’t take the correct steps to rectify the situation.
In this guide, we’ll take a look at what debt help is available, how you can rebuild credit history over time and ultimately get out of debt.
How To Rebuild Credit History
If you’ve struggled with debt in the past and this has had a negative impact on your credit score, then unfortunately just avoiding credit altogether won’t do much to improve things. You’ll need to show lenders that you’re able to make full and timely repayments so that they can feed this back to credit agencies for future assessments.
The cache-22 is that if your credit score isn’t great, it can make it harder to obtain the credit needed to correct this. Fortunately, there are a couple of handy options available to help you grow your score.
Credit Builder Credit Cards
Credit builder credit cards are targeted at those with a poor credit history or with no credit score at all. Contrary to what people often think, if you’ve had no credit in the past this is actually viewed as a negative by lenders since there’s no record of your financial management.
With credit builder credit cards, you’ll often start with a modest credit limit of just a few hundred dollars which can then be increased over time as you continue to rebuild credit history. They do come with higher rates of interest but offer much higher rates of acceptance when compared to more traditional credit cards.
If you’re trying to rebuild credit history but are struggling to get a loan or credit card based on your credit score then a guarantor loan may well be the answer. Guarantor loans are an excellent debt help strategy as they’ll use the credit score of someone you know rather than your own when assessing the application.
Whether the loan is for debt consolidation or another personal expense, it will be down to you to make repayments although your guarantor will need to step in should you ever be unable to pay.
An additional advantage of guarantor loans is that although your guarantor’s credit score will be used to assess the application, it will be your credit score that improves as the debt is repaid.
Top Tips To Get Out Of Debt
If you’re trying to get out of debt then there are some really productive steps you can take to quickly get back on your feet.
Communicate With Your Lenders
If you’re struggling to make repayments on your existing lines of credit then it’s easy to bury your head in the sand and ignore it. This is absolutely the worst thing you can do!
By not tackling your financial responsibilities head-on, the situation will only become more stressful without being resolved.
Instead, contact your lenders and explain your financial situation to them. It’s in their best interests to help you as best they can and you’ll often find they can offer support such as frozen interest, a stop on charges or a delay to your next payment whilst you get yourself sorted. They may even allow you to refinance your debt, bringing monthly repayments back in line with your current financial circumstances.
Create An Honest Budget
Knowing where you stand with your monthly finances is half the battle. Creating a full and honest budget of where your money is going each month will help you to better understand where you can cut back.
Prioritise your spending and ensure that debt repayments immediately follow your essential monthly household spending.
By preparing this budget and having your financial facts at hand, you’ll be able to communicate this to your lenders, giving them a better of being able to help you get out of debt.
Shop Around For Better Rates
The rates for debt consolidation loans are changing all the time and if you haven’t shopped around for a loan comparison in a while then you could be throwing away valuable dollars each and every month.
Debt consolidation loans will allow you to combine your debts together into one easy monthly repayment, making it far easier to manage your outgoings and secure a more competitive interest rate in the process.
Access Debt Help And Debt Advice Services
America is fortunate to have a selection of well-funded debt support services that can help you to find a solution if you’re struggling to repay your debts.
The government operates a useful debt management guide on their website at www.usa.gov/debt. Here you’ll find helpful information on budgeting, any welfare that might be available to you along with contact details for local debt support groups.
There’s also www.debt.org which offers debt relief services and free financial tools and information to help you manage your debt. They can even help to structure repayments with your creditors to give you the breathing space needed to get back on your feet.