Budgeting Strategies for Managing Loan Payments with Bad Credit
Meta Description: Finding it hard to budget with loans for bad credit? Here are some proven budgeting strategies that will help you through your bad credit phase!
Looking for loans for bad credit? No wonder you’re so lost. Finding loans for bad credit here in the UK is becoming increasingly hard. Especially with competitions rising for jobs, rent, and more!
Struggling with low credit scores and another loan payment is coming up? The answer is – creating a smart budget and payment plan. This blog will explain simple budgeting tips to help you pay your loans on time when your credit is not good.
What is a Budget?
Let’s start with the very basics – budgets. A budget is a simple, laid out plan of your expenses. It clearly lists out your income, weekly or monthly expenses, and your savings. Having a laid out budget is an extremely important aspect of having a good financial standing. It helps you regulate your flow of money, and also makes sure you do not miss out on any payments or bills.
Creating a Basic Budget
Follow these simple steps to create your budget today!
- Calculate your monthly income after taxes and deductions.
- Make a list of all your monthly bills and expenses.
- Separate that list into two groups – needs and wants. Needs are must-haves like rent, food, etc. Wants are extras like going out, entertainment, etc.
- Add up just the needed\ expenses to get the total you have to spend on necessities.
- Take your total income and subtract your total needs expenses. Whatever is left over can go towards wants and extras.
- Decide how much of that leftover to spend on wants. Don’t go overboard!
- Any remaining money after needs and some wants should go towards paying debts and loans.
The goal is spending only what’s necessary on needs, limiting the wants, and making sure debts get paid. It takes practice, but a simple budget helps you not overspend.
Budgeting Tips When You Have Loans for Bad Credit
Once you’ve made a basic budget separating needs from wants, here are some specific tips to prioritize loan payments with bad credit:
Avoid new loans/debts
When you’re suffering from the curve of having a bad credit score, the last thing you need is a new loan digging an even deeper hole in your finances. My advice would be to first focus on paying off all your existing loans. Once that is out of the way, you can think about getting another loan.
Budget to pay more than minimums
If you want to make huge leaps in the journey of paying off your loans, try to budget as much as possible. This will help you pay extra every month over the amounts that are due. The faster you get over your paying cycle, the better it is for your finances.
List all your debts in increasing order
Make a list of your loans and debts from smallest balance to largest. Budget to pay as much extra as possible to the smallest debt while paying minimums on larger balances. Roll over the money from the smallest debt to the next one on the list.
Cut back on wants ruthlessly
Be extremely disciplined about limiting “want” expenses like dining out, entertainment, vacations, etc. Any dollar spent frivolously is robbing you of funds that could go toward paying loans and debts faster.
Increase income with a side gig
Making more money can provide extra funds to put toward loan payments. You should definitely get a second job, or go for that side business you were constantly putting off. This way, even some extra cash i.e. $200 to $300 can help you make a slow yet steady difference in your payment cycle.
Stop using credit cards
STOP. USING. CREDIT. CARDS. The worst thing you can do in this scenario is bring more credit debt upon yourself by using credit cards. Make sure to avoid any more credit card bills till your current balance is in the clear!
Downsize housing and car expenses
If loan payments are still too high even after budgeting, downsizing your housing situation or selling a vehicle for something cheaper/paid off can save hundreds per month that can go toward debt.
Speak with lenders about hardship programs
Many lenders have hardship programs that can provide temporary reduced payment options if you’ve had a job loss, medical issue or other financial disruption. Don’t skip payments – talk to lenders about adjusting your terms.
Break up large loans into smaller payments
For large loan balances, see if your lender will allow you to break up remaining amounts into bi-weekly or twice monthly payments. Making a payment every two weeks results in an extra month’s payment per year toward the principal loan balance.
Be patient and persistent
Rebuilding credit after missed loan payments takes consistent, automated budgeting and time. There’s no magic shortcut – just steadily throwing every extra dollar toward eliminating loan balances. Stay motivated and disciplined!
In Conclusion
Having bad credit from missed loan payments on loans for bad credit can feel like a prison sentence – but you hold the keys to your release. With discipline, organization and a strategic budget plan, you can slowly rehabilitate your credit while ensuring no more payments get missed.
Start by separating need vs want expenses. Make needs like rent and loan payments the priority over frivolous spending. Cut expenses ruthlessly and potentially downsize housing or cars. Find ways to increase income through side gigs. Break up loan payments if possible. And most importantly, list out debts and make a plan to pay off smallest balances first.
It all starts with creating and living by a realistic written budget each month. Do that, and you hold the power to turn bad credit around through consistent, on-time loan payments.
