One source of do-it-yourself debt consolidation funds are personal loans. A personal loan is something that comes from an individual as opposed to a bank.
Are personal loans a good source of funds for consolidation
This can be a tough question to answer. Sometimes, personal loans can be a very good way to get a consolidatoin loan. However if you run into trouble repaying it, it could leave you in a very difficult situation with family or friends. Before taking out a personal loan as a consolidation method, make sure you’ve exhausted all your options of self funding. For example, borrowing against a 401k, selling a car, moving to a less expensive house, and cutting out unnecessary expenses can all be ways to avoid taking out a personal loan.
If you do take out a personal loan for consolidation, make sure you understand the ramifications if things were to go bad and you were to be unable to repay. If you are borrowing from your elderly parent who sees it as an advance on your inheritance this might not be that big of deal, but if you are borrowing from your sibling who is in a similar financial situation, but with just less debt, this might be cause for concern.
When you borrow money from someone you are inviting their opinion on how you spend your money–since now they have an interest in you paying back the personal loan. If you can’t handle that, you should probably look to get a loan from someone you don’t know at all–like a consolidation company or a bank.
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