When you have a bad or low credit rating, the usual lending channels are often closed to you. In order to remedy the situation, there are basically two options available – loans for people with bad credit or debt relief.
1. Loans For People With Bad Credit
Bad credit loans are great for a quick fix when you need money urgently or in an emergency. However, before jumping to apply for this type of loan there are a number of disadvantages that you need to be aware of:
– You will only be adding to your financial obligations and creating one more debt that you will need to service on a monthly basis. If you are unable to make your bad credit loan repayments on time every month, it will simply continue to affect your credit score negatively.
– You will be paying a much higher interest rate for a bad credit loan than a regular loan. It is often better to loan the required money from friends, family members to eliminate or lower the amount of interest.
– You won’t be able to apply for large amounts of money over an extended period of time.
If you do opt for loans for people with bad credit, try to use the money to settle some of your other smaller debts. This will free up some of your income to help you get out of debt and start fixing your bad credit rating.
2. Debt Relief
Debt relief, remediation or assistance won’t provide you with quick cash but it will help solve your debt problems and may leave you with some extra income at the end of each month that will prevent you from needing to apply for additional credit or a bad credit loan.
Debt relief involves the assistance of a debt counselor who will employ a number of different methods to help you settle your debt quickly and affordably. The counselor will contact your debtors and request a lowered settlement amount, decreased interest rate or extended repayment period in order to make your monthly repayments more affordable. They will evaluate your income and expenditure to calculate an affordable repayment.
Instead of making payments to your various creditors, you will pay the debt counselor one amount each month and they will then distribute this amount among your creditors. While you are receiving debt relief, your creditors may not harass you for their money and must contact the debt counselor directly.
However, there are some restrictions that may be implemented as part of your debt remediation terms and conditions. You will not be allowed to use any existing credit facilities such as your credit cards or store credit lines. You will also not be able to apply for any new loans or credit during this period, including loans for people with bad credit.
At the end of the day, you need to decide whether the urgency of a situation justifies a bad credit loan or whether debt relief is the best option to end your credit woes permanently.