Managing multiple debts can be stressful, especially if you find yourself in over your head trying to pay them off. Our debts come up for a number of different reasons, and many can’t be predicted. From getting in an accident and injuring yourself, to financing home renovations, debt can quickly add up. If you do find yourself in a position of being unable to pay back your debts, and perhaps having missed a repayment or two, this will reflect on your credit score making it even harder to consolidate your debts and get on top of them. Here’s how to get debt relief with bad credit.
What Is Bad Credit?
If you find yourself with a low credit score, that is considered bad credit. There are so many factors that influence this score, including:
- Missing a repayment.
- Credit utilisation ratio, ie the amount of your available credit you are actually using.
- Too many credit enquiries: each time you submit for a new loan it counts as an enquiry. If you are planning on shopping around, it needs to be done in a short space of time.
- Amount of debt you are in.
- History of debt: the further back it goes, the better. It’s good to have a long history of credit as it shows you are reliable.
- Late payments on credit cards
- Getting rid of a card you have paid off: paying off a card reflects positively on your score, and if you remove it then it is gone. Pay off the card, but don’t get rid of it.
- Taken to court over unpaid debt.
Your credit rating is a score based this credit file by a credit reporting agency. It is a number between zero and 1,200, with the average being around 750. This number determines your creditworthiness.
The problem with bad credit is that lenders often won’t take a second glance at you. This means if you are already struggling with debt, you will find it harder to pay them off as lenders won’t be willing to help you out. Here’s how to get debt relief with bad credit.
How To Get Debt Relief With Bad Credit
Thankfully, it’s not all doom and gloom. People can find themselves in a position of bad debt for a number of reasons, but it doesn’t make you a bad person. Whether you had an error in judgement or unforeseen circumstances, we are going to show you how to get debt relief with bad credit.
The best idea is to take out a debt consolidation loan.
This is a way to bring together all your debts into the one loan. For example, you could use this new loan to pay off all your other debts, so you end up with just one new debt to your name. Debt consolidation offers many advantages.
- Everything is in one place with just one monthly repayment to make. This makes things much more manageable.
- One interest rate.
- One annual fee.
How Can I Consolidate My Loans?
Debt consolidation is a fairly straightforward process, however, if you are in a position of bad credit, then you will need to shop around. Most lenders will consider you high risk, and with that comes high-interest rates. It is worth considering a secured loan.
This means offering up an asset that can be placed against the debt. This could be a house or car. If you default on the debt, then your lender can seize the asset in return. It places all the risk back on you as the borrower, giving you more options of lenders to choose from. Offering up an asset will help you secure a lower interest rate and means you will be paying back less overall. Of course, you need to be sure you can pay off the loan before going down this route (or any form of debt consolidation), or it could leave you in a much worse position.
On the flip side, if you can commit to a new monthly repayment, then you will be able to get back on your feet and find yourself out of debt in no time. Your bad credit score won’t hold you back, and in fact, paying off this new loan will, in turn, improve your credit score and put you in a better position.
Finding The Right Help
If you are ready to pay off those debts and get back on track with your finances, then it is worth chatting with us. We can discuss your options and find the right solution for you. Whether that be in the form of a debt consolidation loan or debt relief with our partner, Just Budget, we can help to get you on track. Now is the perfect chance to see yourself out of debt and back on track to financial control.