If you are like most other Americans, you have debt.
Living a comfortable lifestyle requires most of us to procure mortgage loans, student loans, and credit cards. But what do you do if you have a lot of debt, little to no money, and poor credit?
There are solutions, and What Lies In Your Debt can help. But let’s take a look at how you can get out of debt with no money and bad credit.
Before you can even begin to pay off your debt, you must understand what your credit score means. Credit scores are an indicator of how well you’ve done at paying off your loans on time and signifies to lenders whether or not to extend you a loan.
Think of your credit score as your SAT score, and lenders are the university you are applying for. Your credit score isn’t the only factor lenders look at, but it is one of the most important. If you have below average credit you will have a hard time getting any sort of loan, including a mortgage or new credit cards.
Credit scores constantly fluctuate, so no need to panic if your credit score takes a dip – you can get it back up. Your credit score can go down if you are late or fail completely to make minimum payments on a loan. It can also take a hit if you use too much of the total allowed balance on your credit card.
Different credit companies have different scoring systems and each company has its own report, so your credit score report may vary depending on which company you use to view your report.
Credit scores follow different systems but generally range from 300-850.
Do not use this as a standard for credit scores though; for some lenders and/or credit companies, any score below 600 is considered bad credit.
There are plenty of free online tools to determine your credit score. Just make sure you are using a safe, verified source when disclosing any financial information online.
What Lies In Your Debt can help you pay off your debt and raise your credit score, even if you have no money and bad credit.
A couple of the best ways to eliminate debt is by opening a balance transfer credit card or a debt consolidation loan.
A balance transfer card is basically a credit card with a low or $0 transfer fee and no interest payments for a predetermined amount of time, giving you time to pay off your debt without accruing interest.
A debt consolidation loan combines all your debt into one sum with a set interest rate. This keeps you from defaulting on different loans since they are all in one location, and may give you a lower interest rate than separate loans.
Those are two of the best ways to pay off loans; however, they require a decent credit score.
You won’t qualify for the balance transfer card or the debt consolidation loan if you have bad credit. So what are your options for debt repayment with bad credit?
A secured loan is backed by collateral, and with a co-signer, you have someone else accountable for your debt. You are more likely to qualify for this type of loan since you have a co-signer and your credit score isn’t the only one being evaluated by the lender.
You can also save money on interest by using a low-interest rate loan to pay off high-interest rate debt. But your co-signer also assumes responsibility for your debt if you do not make the required payments, which can be very risky for them. Also, if you default on payments you can have your assets, such as your car, taken to repay the debt.
Financial counselors can help you make a plan to repay off your debt. They can also negotiate a lower interest rate with creditors to make payments more affordable. Like a debt consolidation loan, you will make one monthly payment towards all debt, usually with a lower interest rate than if you tried to pay all your loans off separately.
Financial counselors usually charge a fee, sometimes an ongoing monthly fee, for their services, and not all rates can be negotiated. You typically also cannot use credit cards if you are on a debt management plan, which is good in terms of not accruing more debt, but can be a problem if you don’t have any money for expenses.
Bankruptcy is usually used as a last resort but could be the best option for you. If you declare bankruptcy you are no longer responsible for the repayment of your loans. You may or may not be able to keep your assets (house, car, etc.) if you declare bankruptcy, depending on your circumstances. It does not apply to certain types of debt, such as child support payments or student loans.
You will have to pay legal fees, your credit score will take a huge hit, and you will have a mark on your credit score for ten years. You can raise your credit score within months, but the mark will still be on your score.
The most important things to remember if you need to pay off debt with no money and little credit is that you have options. There are ways to solve this problem if you take action. Don’t ignore the problem and worsen your credit score by continuing to rack up debt. You do not have to do this on your own; What Lies In Your Debt can help.