A 401K Debt Consolidation Loan Could Be The Best Option
For the last 5 years in the USA, most people have not received a raise in salary because of economic conditions.
The result has been that many people have slowly built up substantial credit card or other debt to pay their living expenses.
A debt consolidation loan can help rationalize the situation and also lower interest rates, with the loan being paid off.
Credit card debt is expensive, and simply paying the minimum amount means that your debt is accumulating each month.
Borrowing money gives the option of a lower interest rate and spreading repayments over a longer period, so the loan will be paid off in a few years.
Your monthly repayments on such a loan could be less than your minimum payment on the credit card.
By combining the credit card and other debts you can replace several payments with a single payment lower than the total of your current payments.
This means you will not have to use your credit card for living expenses.
In fact you need to be careful how you use the card, so you do not simply get into the same situation again.
One option for paying such debts is to withdraw from your 401k plan.
However such withdrawals usually incur a tax penalty, so they are not cost effective.
Your retirement funding will also be reduced, which could cause problems after you retire.
A better option might be to borrow against your 401k.
This does not incur penalties, and interest rates are usually quite low.
You should ask your 401k administrators for details of the costs involved, and how much you could reasonably expect to borrow.
Borrowing against your 401k may be a problem if you want to change jobs or are laid off.
In this case the amount outstanding would need to be repaid, and you would need to pay penalties, unless you can claim hardship.
While there might possibly be unpleasant consequences in the future, the current situation is more pressing and needs to be dealt with urgently.
A debt consolidation loan can be extremely helpful in allowing you to stay afloat financially, and ride through the crisis.
If you follow this route, you should be very careful about building up any more debts, until such time as the economic situation allows greater flexibility.
Be especially wary of too-easy use of your credit cards: any momentary relief can simply increase the long term financial pressure you face.
The result has been that many people have slowly built up substantial credit card or other debt to pay their living expenses.
A debt consolidation loan can help rationalize the situation and also lower interest rates, with the loan being paid off.
Credit card debt is expensive, and simply paying the minimum amount means that your debt is accumulating each month.
Borrowing money gives the option of a lower interest rate and spreading repayments over a longer period, so the loan will be paid off in a few years.
Your monthly repayments on such a loan could be less than your minimum payment on the credit card.
By combining the credit card and other debts you can replace several payments with a single payment lower than the total of your current payments.
This means you will not have to use your credit card for living expenses.
In fact you need to be careful how you use the card, so you do not simply get into the same situation again.
One option for paying such debts is to withdraw from your 401k plan.
However such withdrawals usually incur a tax penalty, so they are not cost effective.
Your retirement funding will also be reduced, which could cause problems after you retire.
A better option might be to borrow against your 401k.
This does not incur penalties, and interest rates are usually quite low.
You should ask your 401k administrators for details of the costs involved, and how much you could reasonably expect to borrow.
Borrowing against your 401k may be a problem if you want to change jobs or are laid off.
In this case the amount outstanding would need to be repaid, and you would need to pay penalties, unless you can claim hardship.
While there might possibly be unpleasant consequences in the future, the current situation is more pressing and needs to be dealt with urgently.
A debt consolidation loan can be extremely helpful in allowing you to stay afloat financially, and ride through the crisis.
If you follow this route, you should be very careful about building up any more debts, until such time as the economic situation allows greater flexibility.
Be especially wary of too-easy use of your credit cards: any momentary relief can simply increase the long term financial pressure you face.