1. If you spend more than 50% of your credit limit every month, this indicates to the Credit Bureau that you do NOT have enough cash on hand to meet your monthly expenses. This will identify you as a high credit risk and will actually reduce your credit score by 60 - 70 points overnight (Fair
Isaac).
2. If you miss 1 or 2 payments on your credit card debt, the issuing company will skyrocket your interest rate to a whopping 27% -
30%!
3. Out of a random sample of 3 million American consumers (included in Experian's National Score Index), 51% of them have at least 2 credit cards and 14% of them have 10 or more credit cards.
Getting $50,000 to
Pay Your Debts
You find yourself with $50,000 in outstanding debt and your
credit rating is less than perfect. You obviously need a loan –
and getting credit in the current economy is a challenge – but
if you know where to look and what you need to do to qualify,
you can get it.
Finding a Lender
As
with every important decision, you should do your homework
first. And
do your research. There are companies that ask for fees up
front and say they will “fix your credit” or guarantee you a big
loan, but this is a scam and it’s designed to take your money
and give you nothing in return. The Fair Credit Reporting Act
provides protection from these unprincipled creditors. Check
with a financial advisor to determine what options you have.
Someone you know and trust – preferably someone who is familiar
with your credit history – can steer you to a lender that will
be willing to work with you. There are financial institutions
out there that specialize in giving large loans. If you have a
business, there are companies that will make you a loan in
return for a percentage of your sales. Once you’ve identified a
lending source and applied for your loan, the lender will assess
your credit history. Under the circumstances, they may apply
certain conditions to your loan. For instance, you may be
required to pay higher interest rates than someone with good
credit, or you may be subject to higher penalties in the event
of a missed payment.
Secured Loans vs. Unsecured Loans
You can apply for either a secured or an unsecured loan. An
unsecured loan typically requires no collateral. A secured loan,
on the other hand, will require you to put up something of value
– something to secure the loan – which the lender can take in
case you default on the loan. Banks are always going to be more
concerned about lending money to individuals with bad credit
than to those with good credit – but that doesn’t mean you will
not qualify. Naturally, a person with a low credit rating will
pay a higher price for the loan (in terms of interest rate and
other finance charges) than someone with excellent credit, but
banks are in business to loan money, so this doesn’t mean that
you cannot get the loan you want.
Steer Clear of Adjustable Interest Rates
Once you’ve arranged for your loan, pay close attention to the
details of the loan, especially the interest rate the lending
institution wants to charge you. You may get what appears to be
a great rate on your loan only to find that it is simply a base
rate and that the rate increases significantly after some
predetermined period of time. You will certainly want to get an
interest rate that is a good match to your income and your
ability to pay. Anyone trying to sell you anything else is
simply taking advantage of your situation.
Debt Consolidation Loans
Consolidating your existing loans – combining all your loans
into one – can help you reduce high interest rates and can make
managing your credit much easier. This type of loan will
significantly reduce your monthly payments. A credit counseling
agency can help you decide whether a consolidation loan is right
for you.
Video: An Introduction to Debt Consolidation Loans
Is Bankruptcy an Option?
Bankruptcy
should be your last resort. There are different types of
bankruptcy – Chapter 7, Chapter 11, and Chapter 13, to name a
few – and your legal advisor can explain them to you.
Essentially, however, when you enter into bankruptcy, a receiver
– usually an attorney appointed by the bankruptcy court – makes
a list of your creditors and assigns a value to your assets.
These assets are usually sold (at pennies on the dollar) and the
money received from the sale is used to pay off your creditors.
Remember. This should be your last resort. The bankruptcy will
stay on your credit record for up to ten years and, for the most
part, will prevent you from getting credit during that time.
Video: What happens in Bankruptcy?
Restoring Your Good Credit
Paying back your loan is the critical step toward repairing your
credit score. Be sure you closely monitor the loan repayment
schedule and make your payments on time. This is your
opportunity to prove that you are a good credit risk, so make
the best of it!
Other Ways to Get Your Hands on $50,000
Win the lottery!
Create a Killer Application for the Internet
Sell your Mickey Mantle rookie card on eBay
Find Amelia Earhart and write a book about your discovery
Write a script that becomes the next Hollywood blockbuster
As
with every important decision, you should do your homework
first. And
Secured Loans vs. Unsecured Loans
