Did you try to consolidate debts through a balance transfer card but you were not approved? Using this strategy to consolidate debts involves applying for a new credit card account that offers a 0% interest rate over an introductory period. This usually lasts for 6 months to more than a year. You will transfer all your balance to this card and make payments without any finance charge added to your debts. After all, there is no interest rate. However, once it expires the credit card will revert to its original high-interest rate. Any debt that is left will be affected.
It is important to pay all the debt within the introductory period – or at least a significant amount of the debt. This is why it is an appealing debt solution – especially those who can afford to pay off a huge chunk of their debts within the introductory period.
Unfortunately, you need to qualify to be approved of a balance transfer. And if you are rejected, that is okay. There are other debt relief options for you to try.
If you are like the majority of Americans who have a lot of debts like mortgages, credit card debts, student loans, and auto loans, then you cannot give up. Since reports reveal that most consumer debts are increasing, then you need to act quickly when it comes to paying off all your debts.
Fortunately for you, there are many ways to pay for the multiple debts that you owe. It may not be through a balance transfer strategy but you have other options that work just as effectively. But before dwelling on your options, what should you do first after you have been rejected in transferring your balance into one account?
What should you after a balance transfer rejection
Obviously, there is something wrong with your financial situation and it resulted in the disapproval of your application. If you really want to improve your financial situation, you have to make sure that all issues are addressed.
In order to be thorough with your journey towards a better financial position, you need to do certain tasks. If you act quickly, it is possible that your actions will benefit you positively as you try to solve your credit issues.
These are some of the important tasks that you need to work on as soon as possible.
Stop using your credit cards for now
First of all, you need to stop adding to your debts. Since you are trying to pay off your debts, it is not a good idea to keep on using your cards. If you were trying to consolidate your credit cards through a balance transfer, there is a high chance that you mostly have high-interest accounts. These high-interest cards can easily add finance charges into the balance that is carried over to the next billing cycle. You want to keep this from happening. The less credit you use, the faster you can complete the debt relief process.
Lower your discretionary spending
Discretionary spending is the type of spending that you can control. It is not a fixed amount like your rent. These expenses include food, groceries, utility bills, entertainment expenses, etc. That means if you need to save money on your living expenses, this is the first that you will look into. According to reports, a lot of money is being spent on discretionary spending and the biggest spenders are Millennials ($838/month). If you really want to save, you can cut back on food expenses by cooking your meals from scratch, bringing leftovers to work as your lunch, eating out less, etc. For entertainment expenses, you can opt to do things for free with your loved ones. There are creative ways that you can lower your discretionary spending so you can add money to your debt payments instead.
Work on your credit score
Finally, you will probably need to work on your credit score if you want to improve your financial situation while you are paying off your debts. If you were not approved of a balance transfer, one of the reasons why is your credit score. You probably have a low score at the moment. You should improve on that so it will not hinder you from certain benefits and financial products that can help you pay off your debts.
To improve your credit score, you need to make sure that you will pay your bills on time. It is also important to keep your balance low. If you have old credit accounts, do not close it. These will help improve your score over time.
Effective alternatives to a balance transfer
In case you tried to apply for a balance transfer but was not approved, there are other strategies that you can use to pay off your debts. Here are some of the options that can work effectively.
Debt consolidation loan
This is a type of loan that is specifically used to consolidate multiple debts. Since it is a loan, it has a lower interest rate compared to credit cards. This is why borrowing a loan is the next best thing for those who wanted a balance transfer. Both will help lower the interest rate of the debt that you owe. The difference is that the low-interest rate will last for the whole repayment period. With a balance transfer, it will just be during the promo period.
Of course, you also need to have a good credit score in order to get approval for a debt consolidation loan. You will still be approved of the loan even with a bad credit score. However, it will result in a higher interest rate. Make sure you calculate if it will still help you save money. If not, then go on to the other options to get out of debt.
Another option that you can use is debt settlement. This debt relief strategy involves negotiating your debts and asking the creditor and lenders to reduce your debts. You will offer a lump sum payment that can be provided immediately. Once paid, the creditor or lender must agree to forgive whatever is not paid. This will help you save a lot of money but you have to prove that you are in a bad financial situation in order to pull this off. And if they agree to settle your debts, make sure you have everything in writing before you send any payment.