Should You Use a Loan to Pay Debt? RGG Law Answers
Insurmountable debt is a big problem and more people are in severe debt now than ever before. If you let your debt get out of control, you could find yourself filing bankruptcy before you know it. Because of the this looming fear over the head of anyone in more debt than they feel they can handle, the temptation to simply take out a personal loan in order to pay it off is strong. RGG Law has some advice if you are considering taking out a loan to pay off some or all of your existing debt.
Consider Your Spending Habits
A vital part of assessing your financial situation when you find yourself in debt that you are struggling to pay off is how you got there in the first place. At RGG Law, we work with a lot of people filing bankruptcy and there is often a common trait in that people will become overwhelmed by their debt without knowing how it happened.
If you are considering taking a personal loan to pay off debt as an option, take a long, hard look at how you ended up with that debt. One of the strongest indicators of future behavior is past behavior – so, if you have had a hard time controlling your spending in the past, there is a strong chance it will happen again. The result, in this situation, is just adding more debt to the pile.
Even if you avoid adding to your existing debt, you may find that, due to poor spending habits, the payoff of your existing debt will be slower than you would like. Suddenly having more money on hand, and more financial breathing room, could lead to more spending.
Consolidating Your Debt Into One Payment
One of the contributing factors to overwhelming debt, whether you have bad spending habits or not, is that balancing a number of different monthly payments in different amounts can be a confusing mess. It can be easy to lose track of what needs to be paid back and when and accidentally dropping some of the numbers you are having to juggle will mean missed payments.
If you have a large amount of credit card debt, taking out a personal loan to pay it off can mean the opportunity to streamline your payments, avoiding late fees and making things easier to manage. RGG Law’s team knows how important it is to organize your finances and, if you this is something you have a hard time with, consolidation is helpful. However, RGG Law would like to remind you that this is an upside that comes with a caveat – being able to asses your habits and demonstrate self-control as your debts become more manageable is still important here.
What About Interest Rates?
Lowering your interest rate on your repayments goes a long way to easing the burden of your debt. If you can find a loan with a low enough interest rate, this can make a big difference.
However, this depends on where you get your loan, and what you qualify for with your existing debt and credit score. You could end up consolidating your debt repayments into an easy payment with a much higher interest rate than you had hoped. In some cases, you may even find your original debt more manageable.
Payday Loans for Debt Repayment
The RGG Law team strongly advises against using so-called “payday loans” for repaying debt, or for anything else. Payday loans have become somewhat notorious in recent years, and they carry their stigma with good reasons. Many people who have used these risky, short-term solutions have found themselves paying a high price.
Easy access and no credit checks for a payday loan come with consequences of enormous finance charges and high interest rates, not to mention some of the shadier practices of online payday loan vendors. Applying for a payday loan often results in personal details being sold on to a variety of lenders, looking to make a profit from your desperation to get out of debt.
RGG Law’s Advice
Unfortunately, as with any legal issue, whether or not you should take out a personal loan to pay off your debt is not a yes-or-no, black-and-white situation. If you feel that you have the self-control and discipline to manage it, it is certainly an option. This options, however, carries a lot of risks that can just make your situation much worse.
Our advice, if you find yourself overwhelmed by debt, is to speak to an expert. Our lawyers and attorneys have dealt with countless bankruptcy and financial cases, and our team is here to help you. Contact RGG Law for a free consultation today.