How to Use Personal Loans for Debt Consolidation

If you have high interest credit cards, a tax debt or medical bills piling up, you may be wondering how you can pay down you debt without resorting to bankruptcy. One option that you may want to consider is a personal loan. Personal loans can be great for debt consolidation as they can be used however you want or need to use them.

How Consolidation Loans Help Obtain Debt Relief

Let’s say you owe $5,000 in credit card debt as well as $1,000 in tax debt to the IRS. With a personal loan, you may be able to consolidate those loans at an interest rate of 8 percent or lower. In addition, you can get rid of any liens against you or end wage garnishment that may be reducing your weekly take home pay.

Where Can You Get a Personal Loan?

There are many options available to you when it comes to getting a personal loan. For instance, you may try to get a peer loan in which another individual or a group of individuals fund your loan at a set interest rate and repayment period. You may also want to talk to a local bank or credit union about obtaining such a loan.

Can Your Parents Give You a Personal Loan?

Yes, your parents or another family member could give you a personal loan if he or she has the money to do so. However, don’t be surprised if your parent or family member asks you to sign a promissory note to ensure that the money is repaid in a timely manner. This can act as a powerful tool to help you with money and debt management both now and in the long-term because you don’t want to leave a debt to a family member unpaid.

How Are Peer or Family Loans Different Than Crowdfunding?

You may have noticed that some people have set up websites asking for donations to help pay bills or consolidate debt. In such a scenario, you are essentially asking for free money. With a peer or other type of personal loan, you are guaranteeing that you will repay the money with interest by a certain point in time. There may also be penalties if you fail to repay the money on time.

If you are struggling to pay your debt or simply want to lower your interest rate and save money each month, a personal loan may be right for you. There are plenty of lenders willing to work with, which means it is likely that you can find a loan with reasonable terms to help you with your debt relief quest. You can find more info at the Credit Counselling Services of Atlantic Canada website.