![]() You could also transfer balances to "a new credit card if a better short-term interest rate is available." "Consider consolidating multiple credit card debts into one that has the lowest interest expense," explains Martin. ![]() Take advantage of balance transfer credit cards with promotional interest rates So, not only can a 401k loan help you consolidate your debts and reduce your payments, it could be beneficial for your retirement in the long run. "Plus, you would have a built-in payoff plan through your payroll and be paying yourself back with interest." "The interest rate on the 401k loan would typically be significantly lower than credit card interest rates," says Brian Martin, Wealth Manager at Merit Financial Advisors. In most cases, you can borrow up to the lesser of 50% of your 401k's value or $50,000, which you could then use to pay off your credit card debt. That is, as long as you've built up enough value in it. Your 401k may be your key to debt relief as well. "For example, you have credit card debt at 20% that is incurring interest faster than it can be paid off and you can borrow against home equity at a lower rate," says Shane, "that would provide an opportunity for you to incur less in interest charges and pay that debt down faster." Use a 401k loan ![]() This alleviates the pain associated with interest rates and greatly reduces the amount of money you owe.
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