We all have taken loans to buy something for which we had insufficient money, and we had to resort to borrowing by taking a loan. Having too much debt on an individual can be a scary situation, if not appropriately managed.
It gets worse as more financial responsibilities occur in the borrower’s life, leading to stress in his life. According to a study by TUC, this situation is pretty evident in the UK where the average household debt increases year after year and stands at £15,400.
There are options for a provident loan and business loans offered by direct lenders in the UK. These are unsecured loans that do not even need a guarantor to be produced before its sanctioning. These loans are meant for bad credit borrowers and a substandard credit profile who are usually not entertained by established commercial banks.
The best part about these loans is that they have an instant decision which means the loan approval or rejection decision is superfast. The loan amount is transferred to the borrower’s bank account minutes after it is approved.
There are many ways by which a borrower can effectively manage his debt obligations; these are discussed in this blog. Here it goes:
- Consolidation loan
This is an ideal option for borrowers having multiple loans in credit cards, bank loans, direct lenders’ credit, etc. This becomes tedious as the borrower must remember all the payment dates and amounts depending on loan to loan.
A consolidation loan is taken to repay all the borrower’s existing debt to finish all of them at once and then continue with a single loan. The headache of remembering and managing multiple loans is gone now as the borrower has a single liability.
- Additional source of income
If you are immersed with more than one loan and have to service their interest, then you ought to do something apart from your regular job. This is to effectively manage multiple liabilities and at the same time, not compromise with your daily expenses.
This additional income source could come from online tuitions in the subject you are interested in or rental income from any property you own. This extra income source can be easily generated by working from home on weekends or after regular work hours. You can choose to work part-time or on a freelance basis and earn some side income.
There is an option of loans for the unemployed and the UK offered by direct lenders to fund any vocational course you need to do before starting your online tuitions or freelance journey.
- Personal finances planning
Now that you have loan obligations, you need to plan out your personal finances by efficiently creating a budget. This will help you track your spending patterns and save some additional money by identifying and ceasing unnecessary spending.
This additional saving will quicken the process of loan repayment as you have some new savings now, which can be used to reduce your existing debt liability.
- Lower your living standards temporarily
If you are debt-ridden and have uneven cash flow, then it is high time to contemplate tweaking your lifestyle and living standards. Some of the ways to tweak it are shifting to less expensive accommodation by sharing a flat or inviting a paying guest or going back to your parental property.
It could be buying cheaper brands when it comes to clothing and accessories, sell gadgets you don’t use, cancel subscriptions that are not of use. These ephemeral measures will help you save a decent amount of money which could be used to repay your creditors and finish off your debt earlier.
The credit score is an essential factor for lenders, primarily commercial banks while taking an approval or rejection decision on a loan application. If your credit score is substandard, then there are very high chances that you won’t be eligible for taking a loan from a bank that is offering much lesser interest rates than what direct lenders offer.
Thus, you have to keep improving your credit score or at least don’t let it exacerbate. Here are some tips for maintaining your credit score:
- Beware of credit card usage
People, especially youngsters, find it fascinating to purchase anything and everything by swiping their credit card, but that is not how to go forward when you are already debt-ridden.
If you miss the repayment deadline even by a day, the credit card companies charge a very high-interest rate and your credit score worsen. Thus, one should judiciously use a credit card and spend lesser than what the limit is assigned to him.
- Avoid additional debt
When you already have multiple loans or credit cards outstanding against your name, avoid applying for new loans with different lenders. There are chances that your loan application might get rejected which will further downgrade your credit score and also your future eligibility for taking a loan.
Prefer applying for very bad credit loans from direct lenders who usually perform soft credit checks on borrower’s profile.
- Timely repayment
If you have defaulted on any loan installment or credit card payment, it will reflect your credit profile. These delay in payments leads to a decrease in a borrower’s credit score, which further hamper his chances of getting loans.
- Necessary registrations
Suppose you have a registered address of your home where you live and are also enrolled in your constituency’s electoral list. In that case, lenders can easily verify your residential and personal information, which increases your credibility. If you have migrated to a new house in a new locality, ensure getting yourself registered and records updated.
- Don’t apply for loans quickly
Every time you apply for a loan, the lender searches for your profile to do due diligence on your credit profile. If done frequently within a short period, these searches will lead to some red flags being raised.
It insinuates that the borrower is desperate to get a loan since he is financially broke, which will reduce the chances of timely repayment. All this decreases your credit score. Thus it is advisable to space out your loan application with different lenders.
Emily Rhodes operates as a Senior Content Writer at Easyadvanceloan for 5 years. She oversees the financial planning and monitoring of the cash flow. Emily also helps the firm forecast its financial standing by analysing the operational data and latest reports. It requires detailed research and predicting the trends before arriving at a conclusion. Emily Rhodes’s credible predictions and the best usage of problem-solving and analytical skills help the firm revise financial policies for growth. She ensures the best of her expertise by working in tandem with the CEO and Chief Operating Officer. Academically, Emily is a postgraduate with MBA in Finance from a reputed university.