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Using Your Insurance to Pay Off Credit Card Debt

Published by admin on March 17, 2010

Using Your Insurance to Pay Off Credit Card Debt

Nobody questions the incredible convenience of credit cards, these days you pretty much have to have one. The problem is that credit cards lead to credit card debt, and this is a problem for a lot people. The whole credit card system is designed to keep you in debt, that’s why the minimum payment is so low, that it is no wonder so many people are unable to pay their credit card bills. This is a great system for the credit card companies, they are happy to collect those high interest payments for years on end, but it doesn’t do you much good. Paying off your credit card debt as fast as you possibly can is critical to your financial success.

Did you ever wonder why the credit card company was willing to let you make such a small minimum payment each month? They do it because that minimum payment has been carefully calculated to keep you in debt for as long as possible. The longer they can keep you in debt the more interest they can collect from you, and at the interest rates charged on credit cards the amount of interest they collect is obscene. The minimum payment is cleverly calculated to make it virtually impossible to get out of debt, it really only covers the interest. This means that you are only paying a very small amount towards the principal each month making it unlikely that you are ever going to get out of debt. If you want to pay off your credit cards, and really you should, you will need to find a way to pay much more than the minimum payment.

One option for paying off your credit card debt that few people consider is to borrow against their life insurance. Yes you are paying interest to borrow your own money, but in most cases it is still a good idea. The interest rate to borrow against your life insurance will be much, much lower than the rate you are paying on your credit card debt. There is of course one huge downside, and that is what will happen if you die before you pay back the loan.

If you happen to die before you have paid back the loan the outstanding balance will be taken from the money that is to be paid to your beneficiaries. Before you decide to borrow against your life insurance you need to take a long hard look at your situation. If you have a young family who would have no other means of support if you died it probably isn’t a good idea to take the risk. The same is true if you have health problems or a dangerous job which increases the likelihood of death you should really consider whether or not you are likely to pay back the loan before you die. Either way if you do decide to borrow against your life insurance it is important to make sure that pay it back as quickly as possible.

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