Debt Financing

Debt financing may be easier to obtain than you think. Let’s look at the different options and where you can turn to find money to get out of debt.

The sources and hidden places to find this money are more significant than you think it is.

Credit Cards – Taking a cash advance from a credit card is an expensive way to borrow money. But getting your hands on some cash to use to eliminate a problematic debt can be a smart thing to do.

For example, if you take a $2,000 cash advance to settle a $6,000 debt, the interest you pay on the cash advance is almost always significantly less than paying the other $4,000.

Bankruptcy Attorney – When you decide to file a Chapter 13 bankruptcy, enter a repayment plan, and then have the rest of your debt forgiven tax-free, your attorney will probably let you pay their fee in installment through the bankruptcy payments.

Retirement Funds – This is my least favorite form of debt financing. When you take money out of your 401(k), or some other retirement plan, you lose out on the growth that money would have given you over time.

When you have a 401(k) loan and the stock market is soaring at 15 percent you are paying 20 percent interest on a 5 percent interest loan.

Since your borrowed money isn’t rising with the stock market, the real cost of the loan is the 5 percent interest you may be paying plus the 15 percent in lost investment value increases.

While you can find debt financing money from retirement funds, is that a smart thing to do?

Creditor Debt Financing

Some creditors offer monthly payment plans when you settle debt you owe for less than the current balance.

These payment plans may last for a few months or a few years. That is something you are your creditor have to agree to discuss and see what possibilities exist. Creditor based debt settlement repayment plans are not universal but worth inquiring to see if your creditor offers them.

Debt Consolidation Loan

Depending on your credit score you can still get a debt consolidation loan
at a reasonable interest rate.

Using a debt consolidation loan, you can settle some or all of the debt you owe and have a debt consolidation loan but not all of your previous debt.

The Most Common Debt Financing Sources

As you can see, money to use towards getting out of debt can come from a variety of sources.