When you’re unable to pay a monthly rate, the banks are going to name your file under the letter B – bad credit file. Once you get in this category it will be very hard to get out of this reputation.
This is a practice not for private entities but for much bigger players in the world banking system. Even countries owe money to each other and the World Bank, and they too get a grade after how reliable they are. See what the World Bank is here.
Based on this grade, the World Bank and the IMF choose who are they going to lend some money and what kind of interest are they going to get. The ones that are more likely to have trouble repaying the debts will have worse conditions.
It’s same with the private entities. If you are late to pay the rate once, you’ll be filed in the history of the institution as a person not paying in time. If you do this a couple of times, you get the bad credit name.
Once this is done, you’ll have trouble in getting other loans and you might be charged more by the institutions for things other people are charged less. For example, if you want to get another loan for something, your interest will be significantly higher than some other people will get.
Most of us are not coping with just one credit. We all have more. A loan for a car, for a house, for something you decided to invest a few years ago – all this draws funds from your pocket. A great solution for all this is getting debt consolidation. What is this? Read on, learn about this, and learn about the 5 rules of it.
What is debt consolidation?
Not everyone can qualify for debt consolidation loans with bad credit. Debt consolidation means that a new lender of money will cover all the loans you already have. For this, you’ll get a new loan that will have different interests but you won’t have any other debts in another bank or institution. Not everyone can meet these terms though.
They take care of everything and you only need to agree that the new lender is the person you need to pay each month a certain amount.
However, there are a few things you must know about the consolidation. Read below about the 5 most important that everyone must know.
1. Always know how much you owe
Before you get into this act, make sure you transfer everything you owe. This way you’ll get rid of the bad name. If it happens to forget only one, you’ll still be at the beginning and you’ll have to all over again.
2. Look at interest rates
Different lenders will give you a different rate. Before you agree with anyone, make sure you’re getting the best interest rate there is.
Even a small difference between them can mean a great difference in money at the end of the payment. Don’t be tricked by the zeroes and the ones, because a 0,1% interest can mean a huge difference at the end even though it might not mean anything special at the moment of payment at the end of the month.
Before you make the deal, look up other options in the competitor banks. See if they have something else to offer. If you have no time and resources for going around the town for days and listen to the stories of their employees, you can always open the internet and see what they have to offer. Learn more about interest rates on the link: https://www.ecnmy.org/learn/your-money/banking-and-finance/what-are-interest-rates.
3. Always look for a better option
Even though you made a deal with one entity, you shouldn’t forget about it until the end of your contract. Always be present on the market and follow what’s happening. See if there’s something new and better for you.
The reason we say this is because there’s always something new coming from the banks. New promotions and ideas are always happening and some of them might be better for you. You can get a consolidation for the last debt consolidation and make the interest rates even smaller.
There’s the fact that as time goes by, your loan will become smaller and smaller if you pay off on time. For a smaller amount, banks will give you more options that you can find better to manage. That’s why it’s always good to follow what’s new out there.
4. Don’t miss on payments at any cost
These programs are tailored to get you out of trouble. You and the employee will discuss everything and you’ll find the best solution about what’s best for you. After that, the lender will expect you to respect what you agreed and will expect to make timely payments as agreed.
If you don’t do this, your reputation will fall again. You’ll have trouble getting a better option like the ones we just discussed above and you’ll find yourself on the bottom again. Never miss your payments no matter what happens.
5. Don’t get into other debts
When you get to the point of debt consolidation, chances are big you’re already struggling with money. At this point, you can’t afford to get a new car or something that you think you need.
Try to clear what you’re already in and then look for other life’s necessities. Understand that you’re not in a position to ask for more. Being at this point means you need to do everything in your power to save more money.
With everything said here, you need to know that being in money problems is not the biggest problem you have. Money comes and go and there’s always a solution for them. You just need to sit and think about the options with a clear head.
This option we talked about is great and is tailored for people who struggle with money. Take it and be sure that it’s great. Of course, don’t forget to work and take care of your family too.