With the state of the economy today, many people are finding that they need extra cash for various reasons. Job layoffs, corporate downsizing, rising prices and unexpected expenses are just a few of the reasons you might be contemplating the most practical way to get some additional cash. Finding the best way to obtain that needed cash may not be as difficult as you had anticipated. If you are fortunate enough to have a life insurance policy with cash value, that may be the most cost effective solution to your dilemma.
Some people get money fast by taking a cash advance on a credit card. That method is quick, but it will probably increase the required minimum payment amount on that credit card for months. The interest rate on a credit card balance is usually higher than on other loans, and interest begins on a cash advance the day you take the loan.
If you own your home, you might be able to take out a home equity loan to get extra cash. However, unless you already have a home equity loan and can add to it, there may be extra costs involved. For instance, the lending institution might require an appraisal or survey of your property. The payments you will have to make each month on your home equity loan might be an added burden and increase your money troubles.
There are many companies offering to lend money if you give them a post-dated check for the amount of the loan plus interest. The company will cash that check if you have not paid off the loan by the time it is due. The interest rates charged by these types of companies are notoriously high. You will also incur overdraft fees in your checking account if the company attempts to cash the check when the funds are not available in your account.
If you get a cash advance on your credit card, a home equity loan or a fast cash loan, you will have to make monthly payments on the loan, or make one large payment when it is due. That might cause even more problems for you unless you are certain to be in a better financial position by the time a payment is required.
There is an alternative that most people are not aware of – or do not think about. Banks, credit unions and other lending institutions actively solicit loans, but insurance companies usually do not widely advertise the possibility of borrowing against the cash value of a life insurance policy. Cash value accumulates slowly when you first get the policy, but since it earns interest, the available amount increases faster after a few years. You can check with your insurance agent, or inquire directly with the company, to determine if you have built up a sufficient cash value to cover your needs.
Since you will be borrowing against your own money, it will not be necessary for the company to run a credit check or qualify you for the loan in any other way. There will be interest charged on the loan, but it is usually at a considerably lower rate than the interest charged by a bank, credit union or other lending company. You will not be obligated to pay off the money you borrow from a life insurance policy if you would rather not do that. However, if you should die without paying off the loan, your death benefit will be decreased by the amount of the unpaid loan plus interest. With this type of loan there will be no penalties or late fees to be concerned about if you do not make a payment each month – or if you never pay off the loan. However, if you want to be sure that you have the entire face value of your policy back in effect quickly, you will want to pay off the loan as rapidly as possible.
Peace of mind is worth a great deal, and by knowing that you are not required to pay off a loan on the cash value of your life insurance policy if you are unable to do so, you will feel that a burden has been lifted.