Relief Debt Systems

High interest rates and fees can make paying off credit card debt difficult, but you may be able to improve your progress by borrowing to pay off your debt. The key is borrowing enough to pay off credit card debt at a much lower APR than your existing debts carry. APR, or annual percentage rate, is the amount of interest and finance charges expressed as an annual percentage of a balance owed. The APR for each of your accounts appears on your monthly statements.

Debt Consolidation: Considering Your Options

Several factors impact your ability to borrow money for debt consolidation:

• Amount of your debt: It can be difficult to get debt consolidation loans when you have thousands of dollars in credit card debt. It may be necessary to attack your debt in phases. Always address the highest APR debt first.
• Your credit scores: Finding an unsecured debt consolidation loan can be difficult if not impossible if you have compromised credit. Avoid borrowing money from high cost lenders for making monthly payments when you run short of cash. This only adds to your debt and the APR on such loans are prohibitive. Instead, consider seeking credit counseling and debt consolidation help from a certified credit counseling service.
• Your available credit: If you have sufficient available credit on lower APR credit cards, you may be able to consolidate high APR debt by transferring balances to lower APR accounts. Before transferring balances, read the fine print on the balance transfer offer for determining any interest charges (look for zero percent over 12 months) and pay attention to transfer fees. These can add up if you’re transferring high balances. Finally, determine what the APR will be after the low or no interest rate period expires. If the rate will adjust to an amount equal to or higher than your current interest rates, reconsider using balance transfers.

If you cannot qualify for an unsecured debt consolidation loan, you may be able to get a loan using your car as security for the loan. This gives the lender the right to repossess your car if you cannot repay the loan.

Borrowing from Friends and Family: Worth the Risk?

When borrowing from financial institutions, you agree to repay your debt according to specific (if undecipherable) terms and conditions. Borrowing money from family and friends involves different dynamics, as family members and friends may be reluctant to draw up a loan agreement. If you cannot repay a loan from family or friends, you risk damaging relationships and creating financial problems for others. It’s important to treat personal loans as you would a bank loan. Draw up an agreement showing how much is owed, and the repayment terms. All borrowers and lenders should sign and date the loan agreement.

Understanding borrowing options for debt consolidation requires researching options and prioritizing your needs. Credit counselors can provide financial counseling, debt consolidation through negotiation with your creditors, and can typically help with reducing finance charges.

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