I know that many of you may think I’ve gone crazy with the title of this article – especially since I am trying to pay off debt myself – but I can assure you that I have not.
With interests rates being as low as they are right now, this may be a perfect opportunity to take out a loan in order to refinance debt or start up a business.
Don’t get me wrong, I still despise being in debt bondage, and I would still advise all of my clients, family, and friends to avoid debt whenever possible; but I also understand that taking out a loan isn’t always the worst option.
Here are a couple of situations for which getting consolidation loans might be the answer.
High Interest Credit Card Debt
Some people get into credit card debt because they decided to live above their means. For others, it may have been due to a few acts of desperation. Some may have even tried to take advantage of credit card benefits, and for some reason, were not able to pay off their debt.
No matter what the reason, if you are stuck with high-interest credit cards, it’s time to take action. First, call your bank(s) and try to negotiate a lower rate. If that doesn’t work, see if you have a card with a zero balance and a balance transfer offer. If your savings are higher than the transfer fee, do it!
If none of these options work, it may be best to take out a loan – be sure to take advantage of a personal loans comparison first from sites like http://www.comparethemarket.com/loans/ – and consolidate your credit card debt.
Student Loans
There are a growing number of people who are financing their higher education with the help of student loans. Unfortunately, many of those former students are then put into a difficult financial situation because of their high monthly student loan repayments.
Depending on whether you took out subsidized versus unsubsidized Stafford Loans (or some other instrument), you may end up owing a lot more than you realize once you’re out of the grace period.
Sometimes, the only option in these cases is to secure another loan, which will help you to lower your interest rate and/or extend the amount of time that you are given to pay back the loan – lowering your payments in the process.
Of course, your goal should always be to pay back any debt as quickly as possible, so don’t use your lower payments and a license to go wild with your spending!
Consolidation Loans For Your Car Note
Most people only think about refinancing their mortgage when overall interest rates in the economy drop. However, you can still save yourself thousands of dollars if you can get a new loan for your vehicle.
Don’t forget to compare any fees that you might have to pay with the amount of money you stand to save by refinancing.
The same exact things can be said about refinancing your mortgage – besides, people write about that so often that it gets boring! 😉
photo by Omar Omar
Reader Questions
- Have you ever had to take out consolidation loans for one or more of the reasons listed above?
- Do you think it’s a bad idea to try to fix a debt problem with more debt?
I think it’s a lot like dieting- if you’re really ready to make a lifestyle change and commit to that, just about any option, fad diets or debt consolidation loans, will work. Still, the old tried and true methods of eating less, exercising more, spending less, paying off more seem to get the best long term results.
Praise the Lord I have never had student loans or c.c. debt. I have taken out a loan for my car though; paying it off quickly. Often, as for a business venture, it is in one’s favor to do so because the rates are much lower than c.c. interest. I know I will be taking one out again for a future business venture.
The previous comments are certainly the concern, but for those who truly commit to change behavior, debt con. can save a lot interest money.
A lot of people think that these are bad deals, but they may not be. If you consolidate all your credit cards from 18% interest to a 8% interest rate loan, you’l streamline the payment process and more of your paydown money will pay debt and not interest. If you cancel your cards, you’re not adding debt, just moving it around.
The dangerous part about balance transfers is that it frees up the “available” credit on the account you just paid off. This leads to people thinking they have “Free emergency money” and they tend to just accumulate more balance on it.
The problem that I’ve heard happens most is that people will consolidate, successfully resulting in a lower payment, but then they’ll use that ‘saving’ to buy more stuff instead of working to reduce the debt load or save.