If you are having trouble managing your finances, getting debt consolidation loans may seem like the answer. However, if you also have a poor credit rating, you unfortunately might not be able to take one out.
So, what’s next?
Well, debt consolidation loans, as with all loans, need to be repaid. So if you are in real financial trouble and struggling to make repayments towards your debts, then you may find it hard to secure additional credit.
Avoid Payday Loans
While a payday loan can help some people who need instant access to cash, they are not suitable for long-term lending and should not be used to clear other forms of unsecured debt.
Payday loans work on the premise that you can afford to clear the debt and repay back exactly what you borrow, plus interest, on your next payday. Failure to clear the debt will mean additional interest and charges, and this is what contributes to debt spiraling out of control.
Alternatives to Debt Consolidation Loans
There are other forms of debt consolidation loans that can help you to get out of debt without taking out additional credit. Here they are below:
Debt Management Plans:
A professional debt management company can speak to your lenders and negotiate lower repayment rates on your behalf. These repayments will be based on what you can realistically afford once your other bills have been taken into account. Interest and charges could be frozen and repayments will be distributed between the lenders included in the plan. This is a flexible way for you to clear debts since you can increase debt repayments and clear what you owe in a shorter amount of time. Do your research though, as seeking help like this could cause a further knock to your credit rating.
Individual Voluntary Arrangement (IVA):
This solution normally lasts for a period of 5 years, and repayments will be based on what you can realistically afford. Similar to the debt management plan, interest and charges can be frozen. If any debts still exist at the end of the 5 year period, these will be written off by your lenders providing you have kept to the terms of the IVA. If you are a homeowner, you could be asked to release equity in the final year of the IVA to help repay lenders, but this will depend on your personal situation and will be discussed with you prior to starting the IVA.
Protected Trust Deed:
This works in a similar way to an IVA – repayments will be based on what you can realistically afford and interest and charges will be frozen. Debts will also be written off at the end of the deed period providing terms and conditions have been upheld, and you could be required to release equity from your property in the final year to help repay lenders. The main differences, however, is that Protected Trust Deeds typically last for 3 years and are only available in certain countries.
Seek Help From A Professional:
Whatever your personal situation, it’s important to know that there is always professional help available if you do not qualify for debt consolidation loans. So, please don’t struggle with debt alone! Get help sooner rather than later so that you can get your finances back on track and enjoy your life free from financial struggles.
Remember, even if you don’t qualify for debt consolidation loans, there are still many more options, so don’t despair! Do your research, and enjoy the debt free life that awaits you!
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