Getting a Loan to Pay Off Tax Debt
Getting a loan to pay off tax debt might sound like you're trading one bill unnecessarily for another. However, the reason why many people do this is to get out from under some excessive interest rates that are charged by the IRS. Sometimes it might be more beneficial to get the money from a low-interest credit card instead of having these fees stack up alongside of your regular IRS bill. This is where there are such things as debt consolidation loans and other helpful tools that consumers take advantage of. You just need to be very careful to read the fine print and make sure that your interest rate is not going to jump significantly after a couple months.
Consider Borrowing from Family
Another way to get a loan is to talk to a family member or friend who may not charge you interest for a while. Having financial support like this will help you get on your feet that much faster so you don't end up owing more over time, especially if you are making a low monthly payment. Sometimes this can lead to a much longer payment period than you would if you just bit the bullet and paid it off all at the same time. It is much better than trying to spend years paying off this debt, such as private student loans, that can make other purchases more difficult or even impossible at times.
Learning how to work around circumstances like this will make these bills less disastrous on your current financial state of affairs. As long as you let them know when they can expect to be repaid back, this will probably be a really good solution for some of the tax clients. It also gives you a chance to pay the favor back if and when they find themselves in the same situation. Let them know what your terms are and then you can help them get out of debt.
Reasons to Handle this Debt
If you're wondering why you shouldn't just make payment arrangements with the IRS, there are several reasons. Of course, as already mentioned, the interest rates are high. However, the threat of a tax lien on your property or your business can be very stressful to deal with. It doesn't have the same level of pressure as a regular bill where the loaner is just waiting to receive their money. Because of this, it can cause you other problems that seem to compound over time. By eliminating this pressure and working with a financial source that is going to be more flexible, you can give yourself a little more freedom in terms of your monthly budget.
Working these problems out is important because left untouched, they can come back to bite you later. In order to see what the best solution would be, you need to have an accurate picture of your income and how you can stretch that out. Of course, no one wants to put themselves in financial difficulty to pay one bill, so you'll have to balance this out with your everyday purchases. Those things that are necessary to take care of your family can't be neglected either and you need gasoline to get back and forth to work and school. Keep that in mind when you are considering which loan payment amount is going to work best for you. They will probably ask you for this data as well so they don't have you set up on a plan that is too much for you.
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