A financial crisis can happen to anyone. And, when it does, it usually hits hard and causes you to lose just about everything. Your credit goes in the tank, you have an enormous debt to pay off, and you live each day with worry and stress. The good news is there are several ways to pick yourself up and walk your way through to a bright financial future.
Starting Out Level
Chances are pretty good that you have a lot of debt and that you have household payment too that are beyond the due date. To start a budget, you must get yourself on even ground and make your payments on time.
Since you don’t have the credit score to get a loan through the traditional venue, a bank, you will need to find other ways to come up with the money now. You can go to a family member to borrow some dough, or if you have a 401k retirement plan, you can borrow from yourself up to a certain percent, and then repay yourself with interest. If neither one of these is an option, you can apply for installment loans to build credit and not only acquire the money you need now, but also start restoring your good name.
The last thing you probably want to do is add up the amount of money you owe, but it’s actually the first step in your road to recovery. To set realistic goals for paying off the debt, you must find out precisely what you owe out and to whom you owe it. Once you get the list completed, you can move onto the next step, making a plan to pay it off.
Paying Down Your Debt
If you have most of your debt in just a few places, it will be much easier to get a handle on it. However, if you have many credit cards, a mortgage and a couple of car loans, the process will take a little more time and effort.
For instance, take your credit card bills and see who’s charging you the most each month in interest. Once you have the information, apply the most money to that one first. Once you pay that card down, then you can move onto the one with the next highest interest rate and so on.
Re-establishing Your Credit
A credit score is one of those things that seems to go down quickly if you make a few late payments, however, it takes forever to improve. Thankfully, you’re on the right path by paying your current debt on time. Timely payments account for a large percentage of your score.
The second most significant factor is your debt-to-income ratio, another area that you are also working to reduce. You can apply for a secure credit card to re-establish your credit. Many companies who provide these do require a deposit of a few hundred and give only access to a small credit line. However, it’s a great way to begin.
Going through a financial setback will take time to recover and restore your credit score to good standing. However, if you start paying your bills on time and work down your existing debt, you will begin to see an improvement.