Clear Your Path to Retirement: 5 Ways to Eliminate Debt

Clear Your Path to Retirement: 5 Ways to Eliminate Debt

Swimming in debt yet have a clear vision for the future when it comes to retirement? Get out of your own way by clearing up some of the debris littering your path to those comfortable Golden Years. With the average American carrying $15,000 in credit card debt alone, it can seem stifling and counter-productive to your retirement goals. Here are a few ways to go about it:

  1. Pay more than the minimums on your credit cards: If you’ve been sliding by, paying the minimum on your cards all this time, you have to break that habit. The banks and credit card companies promote this practice by enticing you with low minimums (usually two to three percent of the balance), but you’ll end up paying way more than you should by the time it’s paid off thanks to all the interest. Try to at least double your payment. If the minimum is $50, pay $100. You’ll find the money somewhere – only you know what your luxuries are. Cut back on them and scrape together a few more bucks for a payment.
  2. Use your savings. Say what? Cash out my savings account and investments to pay off debt? Yeah, it stings, but in some instances it’s well worth it. If your debt interest is at 12%, your investments would have to pay more than 18% before taxes to equal that outflow of dollars, says The Motley Fool. Is your savings account earning anywhere near that interest rate? We highly doubt it. When you pay down that debt, it’s like getting that 18% return minus the risk.
  3. Image result for The Motley Fool
  1. Apply for a home equity loan. If you’ve built up equity in your home, why not consider a home equity loan line of credit for the maximum amount possible? You can use this loan to pay off your debt, trading a high-interest credit card debt of, say, 18 percent, and taking a loan interest rate of just five percent. You can even deduct a home equity line of credit on your taxes.
  2. Call your creditors. If your interest rates are sky high and you are having trouble meeting all your payments, simply call each creditor and explain the situation. Ask them to renegotiate your terms for more favorable rates or a repayment plan you can live with. Most creditors want to see some good faith here. Most are reasonable and will work with you if you make your payments on time and agree to a payment schedule at a lower interest rate. SOME money over a longer period of time over NO money is much more desirable by your creditors. Work with them and come to an agreement. Then stick to it!
  3. Borrow against your life insurance policy. If you have a policy in which you have built up cash value, you can borrow against it. You can borrow that money at lower interest rates and take your time paying it back. Just don’t neglect paying it back. If you pass away before you repay it, your beneficiary will be responsible for the outstanding balance plus interest that is deducted from the face value. Don’t leave your loved one with this burden.

Another option is to invest aggressively in stocks in the hopes of making money to pay off your debts. This is risky, so always keep a securities fraud lawyer in your back pocket.

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