When Not To Take Out A Loan To Pay Off Other Debts
There may be other reasons for pursuing a loan, but you should never go into debt to pay down other debt in the following circumstances:
- When the interest rate on the new debt is higher than the interest rate on the loan that you are paying down.
- When you already know you cannot afford to pay back the loan.
- When your home is in foreclosure.
- To buy luxury items, go on an expensive vacation, or buy a new car. A used car is almost always the most financially savvy decision
- If you have so much debt you don’t know where to begin. Bankruptcy could be the best option, but always talk to a financial planner before making this decision.
- When taking out the loan will not enable you to pay off the full balance of the other debts
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