Did you know that about one in four customers seeking a loan is dealing with credit challenges? That’s a large chunk of the population that’s facing financial turmoil. However, the majority of those with an unfavorable credit history didn’t get there through reckless spending or irresponsible financial management. Whether they’ve been driven to declare bankruptcy or simply have unmanageable debt and a low credit score, there are bigger and often unavoidable events that have landed them in financial hot water.
Unexpected expenses due to medical issues, divorce, job loss, theft or casualty are hard to prepare for and are the top reasons that people get into debt, endanger their credit health and often declare bankruptcy. For example, according to a study done at Harvard University, medical expenses are the biggest cause of bankruptcy, representing 62 percent of all personal bankruptcies. And this doesn’t only affect the uninsured – 78 percent of those that reported they declared bankruptcy due to medical expenses were in fact insured in some way.
Why should anyone be ashamed that they were thrust into financial distress due to a rare or serious disease or injury? Similarly, divorce, job loss and loss of property are most often unavoidable. There shouldn’t be shame in these unfortunate life events – all of these are stressful enough without being embarrassed of how it’s affected your finances. How can it be demeaning when the numbers show that those in financial stress aren’t even close to alone? In addition, this stigma leads some people to fear fixing the problem because that means they have to acknowledge it.
So, how do you make your way back from the trouble? You need to build your credit back up. And while it may be hard to shake off the perceived embarrassment and face your financial reality head on, the only way to improve your situation is by doing just that. One of the biggest misconceptions about credit challenges is that taking out an additional loan can only make your financial situation worse. In fact, the opposite can often be true.
For instance, if you need to pay off credit card debt, consider taking out a personal loan.
A personal loan can consolidate credit card debt and improve your credit score in several ways. Personal loans are installment loans which means that the debt on that loan won’t hurt your credit score as much as debt on a credit card that’s almost to its limit. A personal loan can also help by creating a more varied mix of credit types and can help decrease debt at a faster rate.
In addition, seeking an auto loan through a lender that specializes in helping people in your situation is a great way to overcome credit challenges and improve your financial status. Not only does this give customers with a bad credit history a much-needed second chance and an opportunity to get into a better, safer and more economically-stable vehicle, but making car payments on time improves your credit and can eventually put you into a much better credit bracket. In fact, at Prestige, the vast majority of our customers don’t become repeat customers and improve their financial status enough to move into a higher credit bracket. Making timely payments on new credit allows many people to reestablish their credit after bankruptcy, rebuild self-esteem and offers them the potential to move on with their lives and do things like purchase a home – something they would have never been able to do without taking steps to improve their credit history.
Regardless of how you found yourself with a blemished credit history or on the path to declaring bankruptcy, there is always a way to improve your financial status. These struggles should be talked about more openly in an effort to move away from the stigma of shame surrounding less-than-ideal, but circumstantial realities. By doing so, we can work toward everyone being more willing to rely on available resources for help and do things like prudently taking advantage of credit opportunities to improve finances, while still keeping heads held high. While you should be always thoughtful when taking out any type of loan, if you do your homework, seek trustworthy advice, make a smart plan and stay on top of your payments, it can be one of the best ways to pull yourself out of financial strife.