Many debtors attempting to resolve their debt problems without the help of bankruptcy consider personal loans. They figure if they take out a personal they can use that money to cover their expenses and debts and avoid bankruptcy until they “get on their feet.” While in theory it seems to be possible to avoid bankruptcy by taking out a personal loan and using that to survive until you can get another job or more income, it rarely works out that way.
Things you need to consider before you take out the personal loan:
- Are you being rushed into taking out a personal loan by someone else? Is your spouse, relatives or even your creditors suggesting that you should take out a personal loan to avoid bankruptcy? If so, reassess your decision. Taking out a personal loan may delay a bankruptcy filing for a little while; but if your plan doesn’t work you may be forced to repay that loan anyway or file bankruptcy.
- Find out what the interest rates are for the personal loan. If your credit is damaged already, it may be difficult to get a prime interest rate for your personal loan. What often happens is that people attempting to avoid bankruptcy with a personal loan, end up paying very high interest rates on those loans.
- How feasible is it that you will find a job or increase your income in the time needed to repay your personal loan? Many personal loans require that you begin repayment within a few months. Is that personal loan helping you avoid bankruptcy or just adding another bill to your life?