If you do not have any funds in investment or saving accounts that can be used to pay down high interest credit card debts, here are some ideas to get money which you may have overlooked.
Borrow From Friends And Family
If you are not notoriously known as a habitual borrower who never pay back money owed, you are likely to get an interest free loan from family or friends. Nevertheless, you should treat the loan seriously and write down a simple loan agreement clearly stating the terms and conditions, especially with regard to repayments. This will help avoid any unpleasant emotions arising from giving you a $10,000 family loan.
Sell Off Investments Not Within Retirement Accounts
Check whether you are still holding some stocks or Treasury bonds which you may have forgotten about. Chances are they will not be able to generate attractive returns above your current credit card interest rates, so just cash in these investments for money to pay down your poor credit cash advance loans. Check the payable taxes on the selling of these investments to see if they are cheaper compared to carrying your debts.
Borrow Against Your Life Insurance Policy With Cash Value
If you have a cash value life insurance policy, you can try to borrow against the cash savings built up in it. The premiums you pay for such policies are split into two portions, one to cover for life insurance and the other portion is directed to a long term savings. You can either choose to borrow against this cash balance or discontinue the policy completely. If you have dependents relying on you for financial support, do not discontinue the policy. Note that you may be needed to pay an interest fee for borrowing against your life insurance cash value, but this money goes back to your policy’s cash value so its still your own money.
Borrow Against Your Retirement Accounts
Check with your employer whether you can borrow against the balance in your retirement account. Note that this is different from early withdrawal, so you need to pay back the money with a reasonable interest. This is quite similar to borrowing against your life insurance. Note that if you lose your job or quit, you need to repay the loan within 60 days.
Home Equity Loans For Home Owners
Borrowing against the built up equity in your home is becoming a popular choice especially among homeowner faced with prolonged loss of income or unemployment. Home equity line of credit (HELOC) works on the basis that your property’s market value is higher than the outstanding loan balance. This difference can be borrowed at a low interest rate, since it is secured using your home. Tax deductions are applicable on home equity loans making them even cheaper compared to other secured personal loans. Note that in the event that you cannot pay up and default on your HELOC, you may lose your home to bank foreclosure.
Paying Off Debts With No Savings
If you do not have any personal savings that can be used for paying down high cost consumer loans, the best solution is to spend less, save more and earn more. Meanwhile, you also need to stop accumulating more consumer debts.
How To Reduce Your Credit Card Interest Rate
Thanks to the competitive nature of the credit card industry, you can always find a particular card offer with cheaper rates compared to your existing one. This is a good way to pay lesser than the normal 16%, 18%, or 20% interest and that is the best way to reduce your debt interest rate. This allows more of your payments to be used for paying down the loan principal.
Shop for a low rate credit card. There are many easy to apply credit cards for people with stable income and clean credit history. If you have bad credit or unemployed, you may need to try harder to get lower rate credit cards. Next, you can transfer your outstanding balance from your high interest credit cards into the new account. Some smaller banks issue low interest rate credit cards with no annual fees, so you need to check beyond the major banks to get better deals.
Actually, before you do the balance transfer, try calling your card issuing bank to say that you want to cancel your account because you have found a better credit card offer with no annual fees and zero balance transfer. Sometimes, banks are willing to match competitor’s terms in order to retain customers. If they refuse to counter-offer, just do the transfer and leave the account intact. If you really close this account, your credit score will be lowered and you may not qualify for cheaper loan rates.
When you need to charge new purchases to cards, do so on accounts with no outstanding balances in order to enjoy the grace period. When you carry a credit card balance, you have no grace period and interest is calculated immediately on new expenses. Remember that holding large amount of high interest consumer debts is not wise for your financial future and you need to the quickest ways to pay off credit card debts.