Consolidating debt a good idea
Don’t use your IRA to pay debts unless you are 100% confident the money will be replaced within two months, say, with a tax refund.
Otherwise, you’ll be hit with a penalty and taxes on the funds.
Lenders know the competition is tough, and it’s cheaper for them to keep you than it is to get a new customer to replace you — especially if you’re a low-maintenance borrower who pays her bills on time.
While you have them on the phone, ask about these three options: The interest rates on these loans tend to be low — or even interest free.
The problem is that bankruptcy is a serious derogatory mark on your credit.These days, while you can still get personal loans from banks and credit unions, there are generally lower-rate options, such as the ones we have been discussing.Remember, don’t hesitate to ask your bank or credit union to give you a better deal if they want to keep your business.That’s because some may be debt settlement companies that convince you to stop paying your debts and “instead pay into a special account,” the CFPB warns.“The company will then use this money to attempt to negotiate with creditors to reduce the amount of principal you pay off.” If you’re considering this option, try to speak with a nonprofit credit counselor first because debt settlement can put your credit in jeopardy.
(Of course, while you’re using your IRA money, it won’t be earning you any interest either.) From friends and family: These loans can be your best or worst nightmare.