In the current economic climate more and more people are being affected by growing debts. Many of these individuals are experiencing difficulty paying off these debts, and this unfortunately is making a bad situation worse, with penalties and fees only adding to the amount owed and consumers seeing their credit rating, which often is already somewhat low, take a hard hit.
For some people, a bad credit loan is among the debts they see piling up, and this is problematic. It is important to remember that the point of a bad credit loan ultimately is not only to provide you with much-needed money when you have poor credit and few other financial options, but also to help you improve your credit. Therefore, if you have taken out this type of loan, it is critical that you pay it off on time for your credit’s sake, as well to avoid any extra charges that may come with late payment. Thankfully, there are a few simple tips for paying a bad credit loan off in a timely fashion.
Pay More Than the Minimum
Paying only 2 or 3 percent of the outstanding balance of your bad credit loan won’t work in your favor. The first step to getting rid of debt is to break the habit of paying only the minimum required each month. If the minimum payment is $200, double that to $400 or more. Assess your budget, cut down expenses, and you will find the extra dollars needed to increase your debt repayments.
Keep a Weekly Budget
A weekly budget can help you manage your finances more efficiently. You may not have realized how much money you’ve been spending every week on sodas. Or even worse, how much money you’ve been throwing away on those triple lattes you grab on the way to work. A regular budget will make it easy for you to rein in such spending. Use the budget as a guide and work hard to give up any costly habits and reduce unnecessary expenses. Prepare your meals at home and stop buying lunch out every day. You can use the money you save to pay off your loan.
Make Regular Payments
An easy way to get rid of debt is to make biweekly payments. You can save thousands of dollars on interest by paying more frequently because the interest is calculated daily. Set up automatic payments from your savings account to go toward your bad credit loan. Of course, before making biweekly payments, discuss this with your lender because you might be penalized for paying off the loan balance early.
Consider a Debt Snowball
It is worth looking into using a debt snowball, which is a repayment method that involves paying the maximum you can on your smallest debt first. Do not be concerned with interest rates unless two debts have similar payoffs. Once you paid off your smallest debt, roll that payment into your payment on the next highest balance. Repeat until all debts are paid in full. This strategy has gained a lot of popularity in the past few years because it is the primary debt-reduction method taught by many financial experts.
Negotiate With Your Lender
Contact your bad credit loan lender and negotiate on things like interest rates and fees. And if you are dealing with multiple debts and this making it difficult to pay off your bad credit loan, then consider using debt consolidation or debt counseling services. A financial expert can negotiate with your creditors on your behalf and consolidate most if not all of your debts into one monthly payment.
Increase Your Income
Consider getting a second job for some extra income if the situation really calls for it. You can also earn extra money by selling unwanted items on eBay or having a garage sale. If you increase your income, you can put more money towards paying off your loan. Do you have any investments or certificates of deposit? What about a savings account? You can use that money to put towards the loan, which can help you get rid of the debt quicker.