Life Insurance & Paying Down Your Credit Cards

Many people have gotten themselves into very deep debt with the recent economy. Others had it done to them due to the double dealings of the credit card companies. The Credit Card Reform Act didn’t happen because the government decided to crack down on those nice credit card companies for no reason. They were doing some pretty underhanded things. Activity like lowering people’s limits to what they owed, raising their interest rates, and several other unscrupulous events occurred all without notifying the credit cardholder first.

Be that what it may, no matter how you got into debt, whether it was by your own doing or because you were a victim of the credit card companies’ nonsense the end result is pretty much the same. All of this left you trying to find a way to pay off this debt. You could take out a loan, but interest rates are not exactly playing favorites with the consumer right now. You can borrow against a couple of things you already own which can make things just a little easier one is your retirement account which can have penalties if you do not pay it back if this is from an employer and you lose your job, or you can borrow against your whole life insurance policy. Please note it has to be a “whole” life insurance policy to borrow against the equity that you have built up in it. Term life insurance policies are only worth money when you die…sorry.

Your whole life insurance policy after a few years is like an investment that you can borrow against. Somewhere within all the vast pages of the policy that you received when you purchased your coverage is a page that spells out what you policy is worth every year that you have it. As you look down the column of numbers you will see that the first few years it is not worth anything. Then very slowly it starts to have a value.

The other perk to borrowing against these funds is that you do not have to pay the monies back. If you do not pay the money back prior to your demise the money that is owed will simply be deducted from your death benefit payout. Depending on the amount of your total policy this may or may not be significant. If you have a half million dollar policy and you have borrowed $20,000 than $480,000 instead of $500,000 is really not going to make that much difference unless you owe that much on your home.

However, this is something else to think about. You really don’t want to pay off your home when you spouse dies. Why? You destroy your tax benefit and your home no longer accrues equity. It may sound really good, but a payoff may not be in your widow or widowers best interests.

So, the end result here is if you have the monies to do it and your life insurance policy is large enough go ahead and borrow to get out of debt. You can always pay it back, there is no interest related to it, and who knows it may be the stress of worrying about that extra debt from the credit cards that drives you to an early grave?
Life Insurance & Paying Down Your Credit Cards Life Insurance & Paying Down Your Credit Cards Reviewed by Admin on June 22, 2019 Rating: 5

No comments:

Powered by Blogger.