How to Borrow Money to Avoid Debt

Most borrowers do not consider taking out new loans as a good approach to easing their debt loads. This idea might seem counterintuitive to people with heavy debt, but the key is to borrow money from the right resources. You can navigate through debt issues while increasing your credit score by creating a plan of attack while borrowing.

Instructions

Difficulty: Moderate

Things You’ll Need:

• Promissory note

1. Combine any student loans you have before you borrow additional money to relieve debt. You can work with a number of lending companies that specialize in combining several college loans into one payment to help you create an effective budget.
2. Lend yourself money from your retirement account using the hardship provisions in your 401k. The Internal Revenue Service allows you to make loans from your 401k account with no penalty if you are paying off educational costs or avoiding eviction.
3. Ask your human resources representative about employer-sponsored loans to help you avoid debt. Many companies provide smaller loans to their professional staff without high interest rates. You can repay these loans over a long period through automatic payroll deductions.
4. Find relief from your debt woes through your friends and family. People close to you can help you avoid debt issues without a lot of paperwork or application fees. Create a promissory note for each loan to establish a repayment plan that works for the lender.
5. Establish a realistic monthly budget when you realize that you have debt issues. You should add fixed expenses, like housing, with average payments on credit cards and loans. You can avoid future lending mistakes and develop a better approach to paying down your debt by looking at your monthly expenses.
6. Work with your bank to find loan repayment tools to help you with your debt issues. Some banks are part of large financial networks that include lending advisors who specialize in fixing poor credit histories.
7. Make a conscious effort to avoid payday lenders in your community. There are only a select few companies that offer interest rates that aren't predatory. Using one of these companies will mostly likely plunge you further into debt.

Tips & Warnings

• Consolidate your credit card loans when lower rates are offered. If you have a high limit card that offers a temporary interest rate lower than your regular rate, it is smart to transfer small amounts from other cards. You can increase your credit score before you borrow additional money to pay down old debt.