Can I Get a Loan to Pay off Debt?
Many people ask me why they cannot get a loan to get out of debt.
They have applied with other lenders but were turned down because they had a low credit score and too much debt.
It sounds silly that you cannot get a loan to pay off debt because you have too much debt! There is a valid reason for this.
First of all, consider that once you get the loan check, you can spend the proceeds on anything.
There is nothing that says that you have to use the loan to pay down debt.
You could use it to go on vacation or buy a car.
In addition, lenders know that getting a loan to pay off another one does not make much sense.
They understand that if you use a loan to pay off credit card balances, that it is very easy to start charging purchases back to those same credit cards before the loan is paid off.
Then you could end up owing almost twice what you originally owed.
Lenders know that you cannot "borrow your way out of debt.
" Now it is true that some people do pay off high interest balances and benefit from a loan used to pay off debt.
However, the trends are for debtors to find themselves with even more debt than when they first got the loan to reduce their debt.
If you have debt that you are trying to pay off with a loan, then your most feasible option is a balance transfer from one credit card to another.
You may benefit from a much lower interest rate.
The challenge of course is avoiding a situation where you max out both cards.
This can help reduce interest for a while, but it will not reduce your balances unless you start increasing your monthly payments.
Lenders simply are not willing to take too many risks when your purpose for the loan is to pay down debt.
Your credit score is already lower in a large part because of your high debt load.
If you are looking to reduce interest and possibly lower your credit card payments, then consider an alternative to loans.
Credit counselors can show you how to accomplish these things without a loan.
Better yet, you do not need excellent credit to benefit from their programs.
If you are in debt, consider meeting with a credit counselor today and forget about that next loan application!
They have applied with other lenders but were turned down because they had a low credit score and too much debt.
It sounds silly that you cannot get a loan to pay off debt because you have too much debt! There is a valid reason for this.
First of all, consider that once you get the loan check, you can spend the proceeds on anything.
There is nothing that says that you have to use the loan to pay down debt.
You could use it to go on vacation or buy a car.
In addition, lenders know that getting a loan to pay off another one does not make much sense.
They understand that if you use a loan to pay off credit card balances, that it is very easy to start charging purchases back to those same credit cards before the loan is paid off.
Then you could end up owing almost twice what you originally owed.
Lenders know that you cannot "borrow your way out of debt.
" Now it is true that some people do pay off high interest balances and benefit from a loan used to pay off debt.
However, the trends are for debtors to find themselves with even more debt than when they first got the loan to reduce their debt.
If you have debt that you are trying to pay off with a loan, then your most feasible option is a balance transfer from one credit card to another.
You may benefit from a much lower interest rate.
The challenge of course is avoiding a situation where you max out both cards.
This can help reduce interest for a while, but it will not reduce your balances unless you start increasing your monthly payments.
Lenders simply are not willing to take too many risks when your purpose for the loan is to pay down debt.
Your credit score is already lower in a large part because of your high debt load.
If you are looking to reduce interest and possibly lower your credit card payments, then consider an alternative to loans.
Credit counselors can show you how to accomplish these things without a loan.
Better yet, you do not need excellent credit to benefit from their programs.
If you are in debt, consider meeting with a credit counselor today and forget about that next loan application!
