Once you have determined that you are committed to paying off your debt each month, there are several other options where you may be able to get money and consolidate all your credit card bills into one payment with lower interest rates.
If you have life insurance that has a cash value, you can borrow against the policy. The interest rate is usually much better than you can get with credit cards. Before doing this, however, you need to weigh the risks and you will want to repay this loan as quickly as possible. If you do die without the loan being repaid, the outstanding loan balanace and interest would be deducted from the value of the life insurance that was to be paid to the beneficiary. Since you are taking the resposibility right now to get yourself out of debt, the last thing you want to do is pass that debt onto your loved ones.
Another option is to borrow from your 401K plan if you have one. Most 401K plans allow you to borrow the lesser of 50% of your account’s value or $50,000. Interest rates are usually well below credit card interest rates and, even beter, the interest you pay back on the loan is to yourself and goes directly into your 401K account. There are, however, some issues of which you need to be aware. The loan needs to be paid in less than 5 years which should not be a problem if you can follow the guerrilla debt reduction plan. The area that you must be extremely careful about, and sometimes have little control over, is that if you leave your employment before full repayment, any outstanding balance must be repaid immediately. If you can’t, that money will be taxed as income by the IRS and a 10% tax penalty will be levied if you are not 59.5 years of age for early withdrawl froma retirement plan.
A final place you may be able to find money is from family or friends. You need to consider this option quite carefully since the potential to ruin close relationships that can’t be replaced by money comes into play. If you do believe a loan from family or friends may be a potential area to help consolidate your credit card bills, then take the responsibility up front to write a contract of the amount to be repaid plus the interest over a specific period of time. Not doing so could cost you and the lender IRS problems if you don’t.
If after reviewing all the information thus far and there still is no sign that you will be able to climb your way out of debt, it’s time to take a look at the next step…
Working on Your Debt?
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