If you’re thinking of starting a business, one of the first things you need to consider is the strength of your personal financial position.
Even if you’re only at the research stage of your business start-up process, it’s easy to find yourself trapped in a cycle of personal debt – if things don’t go to plan the bills quickly mount up and you don’t have the income to cover your expenses.
One of the negative consequences of running up personal debts is that even once you’ve worked through your challenging situation, and established a more stable financial position for yourself, it’s likely that you’re going to be left with a compromised credit history that will inhibit your ability to successfully apply for loans, credit cards, or finance in the future.
It’s important to try and repair the damage that’s been done. Here are some steps that you can consider when looking to rebuilt your credit history
Simplify your personal financial affairs
The first step to take is to consolidate all of your debts. Usually the simplest way to tackle debt consolidation loans for bad credit is to bring any credit cards or store credit facilities into a single personal loan. This will help to simplify the repayments required and will most likely give you a lower overall interest rate charge, saving you money in the longer term. Consolidating your debts as part of a debt reduction strategy is a good indicator that you’ve got your debts under control and can effectively manage your finances – particularly if you’re considering applying for an unsecured business loan.
Your home could be your most important asset
If you own your own home, or property of some sort, then unlocking your equity from this asset can help to reduce your unsecured personal debts. The advantage of using the equity in your property to manage your finances is that by securing your debt against the asset you will be able to achieve a lower interest rate, thereby saving you money. However the drawback with this approaches that if for some reason you are unable to maintain payments against the debt that you’re servicing, then you are placing your home at risk.
Ensure that you’re setting yourself up for success
Don’t set yourself an unrealistic payment plan, it will only end up causing you more problems if you remain in a financially vulnerable position. Shop around financial institutions to ensure that you’re getting the best interest rate possible, and a repayment structure that suits your circumstances. You need to be able to commit to a realistic budget that can cope with the monthly repayments that you are setting for yourself.
Keep tight control of your expenditure
Until you can demonstrate that you have returned to financial stability, it’s imperative that you don’t take on any new debts. Avoid the tempting offers of new credit cards, or lines of credit with low interest rates – stick with the debt consolidation plan that you’ve set for yourself. Repair your credit history and begin to look to a sound financial future.