Bad credit can happen to the best of us. A series of financial events can take place to hinder our ability to pay our debt. A loss of a job or several high paying emergencies, whether it be health related or due to car and house repairs, can put one behind in making payments.
Many times people will ignore their late due payment notices for loans which can be the worst possible thing to do. Most of the time when you notify your bank or lender and tell them of your financial situation, they are willing to work with you. Some banks will set up a payment plan that will work better for you until you are back on your feet. Some will allow you to make payments only on the interest of a loan and not the principal for several months or whatever you may be able to work out with the financial institution. But ignoring notices tells the bank exactly what you don't want them think, that you don't care about paying back your debts.
There is Life After Debt
Don't let pride get in your way of asking for help. Financial institutions, for the most part, want to help when you are in a money bind. Allow them to work with you on a payment plan that will suit both your needs.
You may be able to lower your cost of credit by consolidating your debt through a second mortgage or a home equity line of credit. Think carefully before taking this on. These loans require your home as collateral. If you canít make the payments - or if the payments are late - you could lose your home.
The costs of these consolidation loans can add up. In addition to interest on the loan, you pay points. Typically, one point is equal to one percent of the amount you borrow. Still, these loans may provide certain tax advantages that are not available with other kinds of credit.
Personal bankruptcy generally is considered the debt management tool of last resort because the results are long-lasting and far-reaching. A bankruptcy stays on your credit report for 10 years, making it difficult to acquire credit, buy a home, get life insurance, or sometimes get a job. However, it is a legal procedure that offers a fresh start for people who canít satisfy their debts. Individuals who follow the bankruptcy rules receive a discharge - a court order that says they do not have to repay certain debts.
Here are some points to keep in mind before you respond to ads that promise easy credit, regardless of your credit history:
1. Most legitimate lenders will not guarantee that you will get a loan or a credit card before you apply, especially if you have bad credit, or a bankruptcy.
2. It is an accepted and common practice for reputable lenders to require payment for a credit report or appraisal. You also may have to pay a processing or application fee.
3. Never give your credit card account number, bank account information, or Social Security number out over the telephone unless you are familiar with the company and know why the information is necessary.