What to Do After Debt Consolidation with Bad Credit
Life is harder when you have a lot of debt. It’s even more challenging when you have bad credit. These two things together are going to limit how you live your life. Fortunately, there are options for people in this situation.
Here’s what to do after debt consolidation with bad credit.
Stick to Your Budget
You don’t want to let your guard down after consolidating your debt. While you might have gotten much better terms on your loans through the consolidation, it’s not wise to get lax with your second chance. Sticking to your budget is one of the most important things do after consolidating your debt.
One positive about consolidating debt is it simplifies the repayment process. This should make it easier to create and stick to a budget when many of your unsecured lines of credit have been rolled into one.
When it comes to budgeting, here’s what you need:
- All financial statements, including all accounts and bills
- Figure out the total income you bring in each month
- Add up your monthly costs, broken into fixed and variable categories
- Find the difference between costs and income
Crafting and following a budget is important after debt consolidation because you need to be extra vigilant about paying your bills during this time. Otherwise, you can end up in an even worse place than before you consolidated your debt.
Don’t Fall Back into Old Habits
Studies have shown medical expense is the top reason cited by people filing for bankruptcy. It’s important to acknowledge many financial and debt-related issues aren’t due to personal failings, but systemic oversight. At the same time, people do occasionally make irresponsible decisions.
If you have some not so great spending habits — such as eating out excessively — you’ll want to avoid falling back into them after consolidating your debt. The process of consolidation is a chance to get ahead on your debt. This is only going to happen if you kick the habits that got you into debt in the first place.
Reevaluate Your Debt Situation
No two people’s lives look exactly the same when it comes to debt and finances. It’s possible getting a debt consolidation loan with a bad credit score will be enough for you to regain control of your debt. Then, you pay off a single loan instead of many.
Simplifying the repayment process and lowering the net interest rate can be enough for some people to get out of debt. If you need more help than this, however, debt settlement or bankruptcy might be your next place to look.
Look for Ways to Boost Income
Getting out of debt is about more than just restricting your spending. Your income is another major factor in determining your ability to pay off a consolidation loan. While it might be easier said than done, boosting your income is one of the best ways to reduce or eliminate debt.
Bringing in just a little bit more per month means you can dedicate those funds directly to paying down debt. This will give you greater peace of mind once you can get it under control, and can put you on a much better track financially.
Make Sure You Pay On-Time
It’s always important to pay your bills on time. After all, your payment history accounts for about 35 percent of your FICO score. There are a couple of reasons why paying on-time is essential after getting a consolidated loan for bad credit.
First, you want to start rebuilding your credit. Having a bad credit score makes your life harder in a variety of ways. It’s more difficult to get a loan. And if you do get one, it’s going to come with a high interest rate. You might also be on the hook for fees and other unexpected costs if you don’t pay your consolidated loan on time.
Getting a consolidation loan with bad credit can be a way to have a second chance to rebuild your finances. Make the most of it, and you can finally get out of debt.