3

I am looking to take out a $40,000 loan to buy out my mother's existing business, that is doing quite well. I explained to the loan officer, in a phone conversation, (I have not yet sent in my paperwork) that I don't have any cash, I have debt, but I have great credit and have been running the business from day one anyway. He sounded optimistic, mentioned he could get the SBA to back it, or I could get a guarantor. He sounded in general very positive. I DID NOT however, tell him I owe about $10,000 in back taxes to the IRS. I'm on a payment plan. I can maneuver this debt to credit cards, and I'm sure, get some penalties reduced. Which looks better, owing the credit card companies, or owing the IRS?

  • You should probably an approximate credit score, debt to income ratio, etc. Perhaps your mother would finance the debt? – ChuckCottrill Dec 19 '13 at 23:37
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Neither.

Keep in mind that while you're on a payment plan with the IRS, you pay much lower interest than what you'd pay for a credit card debt. I suggest sticking to your payment plan and paying it off without incurring additional debt or rolling it over to credit cards.

  • Actually, not so much. The APR rises every month with IRS. If I don't get this loan, I'm conceivable out of a job. So incurring more debt will enable me to pay off my debts. I'm more curious about the perception of the lender, which looks better/worse. – Stephanie Dec 13 '13 at 5:22
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From personal experience, stick with the IRS. As @littleadv pointed out I found the APR to be significantly lower (and for me it stayed the same through out the years I was on the plan - the penalty amount shown on the statement increases as it accumulates, but the APR stays the same) and, unlike credit cards, the debt does not show on your credit report. So unless you tell the bank about it, they won't know (not speaking to to ethical side of not telling them, that'd be up to you).

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