Anybody who has a credit card knows what a useful tool they are, unfortunately there is a huge downside to this usefulness. That downside is credit card debt, a problem that more and more people are struggling with every day. Getting into trouble with credit card debt is remarkably easy, getting out of it on the other hand is much more difficult. The credit card companies don’t make it easy to get out of debt, they actually like having you in debt, they make more money. The high interest rates that credit cards come with make it critical to your financial health that you get your credit card bills paid off as fast as you possibly can.
It is important when you get your credit card bill each month that you keep in mind that the credit card company is not your friend. It may seem like they are helping you out by allowing you to make just a small minimum payment each month, but they aren’t. The low minimum payment is for their benefit not yours, it is designed to keep you in debt and paying interest for as long as possible. If you do just make the minimum payments it is unlikely that you will ever pay off your credit debts, most of your payment gets eaten up by interest. In order to get out of debt you absolutely have to pay more than the minimum, a lot more. Luckily most people have sources of money to make these payments, even if they don’t realize it. One option is to borrow against your life insurance to pay down your credit card debt.
Many people have a life insurance policy that has a cash value, if you do you can borrow against that policy and use the money to pay off your credit cards. A lot of people don’t like to do this because they are in effect paying interest to use their own money. Disagreeable as that may be it is usually still a good idea to because the interest rate will be much,much lower than the rate you are paying to the credit card companies. The far bigger downside is the issue of what happens if you die before you pay back the loan.
Should you die before you paid back the money that you borrowed from your life insurance policy the amount that you still owe will be reduced from the amount that is paid to your beneficiaries. This may be a problem depending on your personal situation. It may not be a good idea to borrow against your insurance if you have a young family who would have no other source of income if you died. It probably also isn’t a good idea if you have health problems or a dangerous job. You need to realistically decide what the chances are that you will die before you have paid back the money and what the consequences for your loved ones would be if that happened.
Only you can decide if it’s a good idea to borrow against your life insurance policy to pay off your credit card debts. You need to consider the likelihood that you will die before you have paid off your debts as well as how your beneficiaries would be affected if they received a lower payout. This is a major decision and you cannot afford to make it lightly.