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Debt Solutions - Your 12 Ways Out From Debts (part 4)
By Cornie Herring
Being in debt is no fun, especially if you are struggling to make ends meet. Because debt is a complex issue but there may be more than one solution. This article will outlines 12 common methods use by most of debtors to get rid of their debts. Among these 12 debt solutions, there may be one or more options which you can use to solve your financial problem.
6 debt solutions: Self Repayment Plan, Debt Settlement, Debt Consolidation, Debt Consolidation Loan, Credit Counseling and Cash out Refinance had been discussed in the past 3 parts (Part 1, 2 & 3), this part will talk about another 3 common debt solutions.
Retirement Benefits
If you have a 401(k), plan or certain types of pension plans, most employers allow you to borrow against your retirement account. Typical plans allow you to borrow up to half your vested balance, but not more than $50,000. You usually must pay the money back, with interest, over five years. If you don't repay the loan, you will owe income tax and a 10% early withdrawal penalty. This type of loan offers low interest rates and is much easier to handle. Hence, you can borrow against this retirement account to settle the high interest rate loan.
There are a couple of big drawbacks which you should aware of. First, you are giving up the tax-free compounding of the money you withdraw. That could lead to a significantly smaller amount on retirement day. Also, if you leave your current employer for any reason, you will probably have to pay the loan back immediately or face taxes plus a penalty.
Credit Union
Credit unions generally have lower interest rates and fees on loans. These loans normally offer to member only. If you are not a member, check with your employer, or organizations of which you are a member and find out if you are eligible to join one.
Most loans are 1, 3 or 5 years in duration. From time to time individual credit unions will offer special loan rates so it is beneficial to check in with your local credit union regularly. The
type of
loans available depends on your credit union.
A credit union
loan has some very special features:
- Loans are insured
at no direct cost to the eligible member.
- Repayment
protection insurance is available as an optional extra.
- No
hidden fees or transaction charges.
- Repayments
calculated on the reducing balance of the loan. This means
smaller interest repayments as you repay your loan.
- Repayment
terms to suit your particular circumstances.
- Flexibility
-you can repay the loan earlier or make larger repayments
than agreed with no penalty.
- Additional
lump sum repayments accepted with no penalty
Insurance
You
can borrow from the life insurance policy at a very
low interest rate in order to solve your debt problems.
The most advantageous thing is that, you do not have
to repay this loan. Your life insurance benefits will
be reduced by the amount you borrow in addition to
any accrued interest.
In Summary
Borrow
money from your retirement account or credit union are another 2 methods to use lower interest
rates loan to pay for high interest rates debts. Whereas, borrowing the money
against your insurance mean that you are lowering your protection sum to pay
for your debts. Anyhow, these are another 3 methods of debt solutions for your
choices.
See you on part 5 for more debt solutions. |
