Debt Consolidation Loan or Borrow against Your Life Insurance Policy?

Many people try to decide between a debt consolidation loan and borrowing against a life insurance policy. It is critical to try to eliminate significant debt in one way or another. One way to do that is through a debt consolidation loan. Another popular alternative is to borrow against a life insurance policy. If you are trying to decide between the two, here are a few things that you will want to consider before making a decision.

Debt Consolidation Loan

A debt consolidation loan allows you to borrow money from a lender and pay off all of your credit accounts at once. You then have one centralized debt with the debt consolidation lender. You have one payment to worry about and one interest rate. This strategy can be very beneficial, as it allows you to focus in on the debt in one place. When your debt is scattered over five or six places, it can be very hard to see any progress. You do not know which account to pay down and which one to leave alone. Having it all in one place can help you get through the debt faster. You will also be able to get a fixed rate on the loan and a fixed payment. When you are paying on credit cards or other similar accounts, you will most likely have a variable interest rate. This can make it difficult to plan your monthly payments as you go. 

With a debt consolidation loan, your approval depends on your credit worthiness. You'll need a good credit score and sufficient income to repay the loan. 

Life Insurance Loan

A life insurance loan allows you to borrow against the cash value of the policy. In order to do this, you will have to make sure that you have a whole life insurance policy or something similar. You also have to find out the rules about borrowing against your policy. 

There are a few big benefits to borrowing against your life insurance policy. For one, you do not have to have good credit in order to be approved. As long as your policy allows for loans against the cash value, you can borrow against it. Most policies will have a limit that you can borrow and as long as you borrow below that limit, you should be fine.

Another good thing about a life insurance policy loan is that the interest rates are low and the payments are flexible. The interest rates will usually be lower than any other type of loan you could get. You also are not bound by a fixed payment schedule. 

When you combine all of the factors, life insurance policy loans are usually the best option. If you have a whole life insurance policy, you might as well use it to your advantage. 

How long do you have to have a life insurance policy before you can borrow against it?

If you have life insurance, you may borrow against the policy in some cases. The policy has to be one, such as a whole life insurance or variable life insurance policy, that accumulates a cash value. In order to borrow against your life insurance policy, you have to have accumulated some type of cash value. In most cases, you will not have any cash value built up until the third year of the policy. It will be different for every life insurance company and policy. You need to check with the terms of the life insurance policy to see if there are any exact dates.

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