When a person takes money from a bank in the form of a loan, the bank will generally require that he pay back the money within a set period of time, at a specific rate of interest. If the person fails to do so, then the bank may attempt to collect on the debt in various ways. The person may attempt to recover from this debt first by paying off his outstanding balance and then repairing his credit.
Bank Debt
A person can incur a debt to a bank in two main ways. First, he can take out a loan from a bank and fail to pay it off. Second, he can overdraw an account he has the with the bank -- usually a checking account -- and fail to pay off the outstanding balance in a timely fashion. In either case, the effect is the same: the person owes the bank a legally enforceable debt.
Paying Off Debt
The first thing a person should do when trying to recover from bank debt is to pay off the outstanding balance. While the best thing for the person to do is to pay off the entire balance as soon as possible, if he cannot, then he should attempt to work out a payment plan with the bank. Some banks may be willing to accept a series of regular payments over time.
Credit Rating
In addition to paying off the debt itself, the debtor must also worry about repairing his credit rating. If the person failed to pay back a loan on time, then he can safely assume that the bank reported this delinquent debt to a credit reporting agency, which likely hurt the individual's score. If the person incurred the debt by overdrafting his account, the bank may or may not have reported the debt, depending on how much time elapsed.
Rebuilding Credit
The best way to rebuild credit is to pay off existing debts and take out new loans. When a person takes out new loans and pays them back on time, then his credit will improve, albeit slowly. If the person has difficulty getting new loans at reasonable rates of interest, he may wish to obtain a secured credit card -- a card in which a deposit acts as collateral on the line of credit.
0 comments:
Post a Comment