Practical tips to help you improve your credit rating and avoid expensive high interest loans
If you are already in debt, there is every chance that you already know many of the problems that can be caused. You can’t get a loan, you can’t buy a house and many other options can be severely limited.
However, just because you may be in debt at the moment does not mean that things have to stay this way and in the following article, we have outlined 3 tips to help bring outstanding debt under control.
Before even beginning to tackle debt, you must first have an accurate idea of how much income you have each month and what your essential expenditures are.
Only by working out these figures will you be able to identify where any cutbacks can be made which can be used to start repaying some of your outstanding debt.
For a quick way to start budgeting, please give this useful tool a try – https://www.moneyadviceservice.org.uk/en/tools/budget-planner
For many, this is the most painful step of all but there can be no avoiding it! Take the scissors to those credit cards.
There is very little chance of reducing debt if you continue to spend on your credit cards, so this is a critical part of any debt consolidation plan.
There are several ways to go about this. Many people take a second loan out on their home (a very risky option) and we strongly advise you to avoid this for the following reason:
When you take a second mortgage or loan on your home, you are putting all of that unsecured debt into a secured debt.
In short, if you don’t pay it back, you are at severe risk of losing your home, all for the sake of consolidating a number of much smaller debts.
This video outlines the principles behind the practice of debt consolidation
You could find a personal loan from a relative or bank willing to take a risk and do far better. Some people opt to get a co signer and go for a loan in this fashion instead of a personal loan from a relative. By getting a new loan, you are effectively ‘lumping’ everything into one smaller payment.
Many people include their living expenses for one or two months when they get a debt consolidation. This allows them time to get some money set aside into a savings account. This then gives them a buffer in case something goes awry in their repayment. By setting this money aside they are creating an emergency fund.
Debt consolidation works well for those with smaller debts. For those with larger debts there are other options that a debt consolidation company can discuss to help ease the burden.
This company will help you to balance your budget and pay off your debt within a pre set amount of time. There are many companies that specialise in this and will help you to do it. If you are going through a company like this there are a few important facts to note.
The first of these is that in most cases, you the creditor are still responsible for contacting the company the debt is owed to. You’ll have to notify the debt company of what you are doing and in some cases you will be the middle man.