Ways You Can Cut Credit Card Debt (part 2)

 

Assuming that you have already started with our part 1 of this debt free article on how to eliminate your credit card debt this is the continuation of it…

Cash out Your Savings:

 

Another way to avoid paying those nasty high interest rate credit cards we have been discussing in this article is to use your savings to eliminate the debt. Don’t be nervous, you can cut your credit card debt by utilizing your savings to pay off these cards. Think of it like this, even if your savings is paying you the stock market average of 11%, you're still paying out more than you're earning. So, paying off the credit card debt this way is comparable to earning 18% risk free. If you consider using savings like this, you will be less than nervous about diving into your savings. Using your savings in this manner is not like you are losing your savings. In the long run, you are earning more money actually.

Borrow From Your Life Insurance:

 

If you have a life insurance policy, there are ways you can use it to help getting rid of your credit card debt. You can borrow the cash value of your life insurance policy in order to pay these credit cards off. Just be sure to pay back the loan if you want your insurance coverage to stay the same. You don’t have to pay the money back if you are willing to take a cut in your policy worth too. If you do take money from your policy and don’t want to pay it back, that is fine as long as you are leaving enough money in your policy worth to cover the needs of your family.

 

Home Equity Loan:

 

Home equity loans are great way to pay off credit card balances as long as the rate you get your loan at is worth while. Anyone with good credit standing can get really good rates that make this a very favorable way to get out off high interest credit cards. By using the equity in your home to pay off your debt can easily be a win-win situation for you. This is due to the fact that your credit card debt will be paid off and the fact that you may be able to deduct the interest from the loan on your income taxes in the next year. While this is a great way for you to get out of credit card debt, be sure to avoid the trap many people fall into when they get the check, pay off the credit cards -0 then use the credit cards again and amass more debt and have that new loan to pay too.

 

Borrowing from Your Retirement program:

 

If you have a retirement plan, consider using some of it in order to pay off your credit cards. When you do this, the interest you pay goes into your account, so you are actually paying yourself more money in the long run. Keep in mind that there is a limit as to how much time you have to pay this type of loan back before you get hit with tax penalties. You have to pay this type of loan back within 5 years. Also, if you happen to stop working for the company where you have this 401k, you will be hit with the fact that you have to pay the loan back immediately. Now, if you do not repay the loan in this case, you will be hit with a pre withdrawal tax penalty. SO, be certain of your abilities to pay this loan back and be sure to consult with the representatives from your retirement plan first to get the exact details on your options. Most employers have associates from your retirement plan on staff for you to consult with at no cost to you.  it at this time the amount due will be taxed as a withdrawal, and if you are under 59½ you will pay an extra 10%. Plus the money that you pay back into your 401k is already taxed, and will be taxed again when you withdraw it at retirement.

 

Renegotiate Terms With Your Creditors:

 

Before you get behind in your credit card bill payments, try to negotiate new terms with your credit card agencies. This can be very helpful and costs you nothing to do. Even if your credit is a bit less than perfect with a credit card company, you will find than many of them will work with you to keep you in good standing. After all, these companies want to get your payments and renegotiating will save them money in the long run if they feel you will fall behind with out the new deal.

 

Borrow From Your Family or Friends:

 

This is not always the best of ideas, but if you have the right situation at hand - try borrowing from a friend or family member. These loans are interest free, but if you have problems paying them back, you will not only have a potential volatile situation on your hands, but you can ruin relationships by not paying the money back.

 

(870)