Picking the right type of debt transfer agreement can make the difference between getting out of a financial mess and digging your hole deeper. Debt transfer options range from credit card transfers to loan consolidations and taking out a new home equity loan. Finding the right one requires time, research and a little patience.
Credit Card Balance Transfers
One method of transferring debt involves moving credit card debt from a higher-interest card to a lower- or zero-interest card. This can save money if done correctly. Make sure the fee isn't so high that it counteracts what you'll save from the lower interest. Research how long the low-interest offer lasts. If it ends in just a few months and then jumps to an interest rate that's higher than when you started, you might not save much money in the long run.
Transferring Car Loans
If you're selling your car, you can indirectly transfer the debt you have left. The buyer of your car can take out a loan that includes the amount of debt you have left to pay. He can pay that amount to you so you can pay off your loan. With this method, you are essentially transferring the loan to the new owner.
Assuming House Mortgage
An assumption occurs when a buyer takes over the homeowner's mortgage. They're rare, however, because many banks don't allow mortgages to be assumed. If it is allowed, the buyer has to make a down payment to compensate the owner for his equity. Despite this, the buyer can save money over time by enjoying the owner's lower interest rates and making fewer payments overall.
You can consolidate your debt by paying off your high-interest credit cards and other loans with a low-interest bank loan. A home equity loan is another consolidation option that is often tax deductible. The rates for home equity loans are lower because the loans have collateral in your home, versus the unsecured debt on credit cards. Research your options before going this route. You may not want to put your home on the line unless you're sure you can pay off the debt.
Assigning Business Debt
In some cases, you can transfer your personal debt to your business. For example, if you used personal debt to finance your business because you weren't eligible for a business line of credit, you can transfer that debt back to the business by creating an assignment of debt document. Consult an attorney before pursuing this option.