Your life insurance policy comes to great use after you pass away by protecting your family from overwhelming debts. This has never been more important than now, when the consumer debt has reached to record levels. The reality is that household debt has overtaken household income as found by a Center for American Progress study. Currently, it has reached a whopping $2.7 trillion in 2006. This has led to many Americans to pay off their debt as the number one financial priority.
Tips for overcoming debts
It must be realized that debt is not always a bad thing if it is managed and spend carefully. In case you are submerged in credit card bills as well as creditor phone bills, there are certain things that must be kept in mind.
- Pay more than the minimum requirement - If you pay off your balance faster than the minimum set for you, you pay a less interest. If you keep putting off full amounts, you may actually be paying more for interest that the original principal. This only results in more agony. If there are multiple credit cards, try to pay off completely on one credit card and also pay the minimum on the other cards. This way, you are in a better position to manage your paying off of credit cards and is cheaper than maintaining several partially paid-off credit cards.
- Borrow against other assets - It is likely that interest rates on credit cards are higher than the rates of return on investments as well as savings accounts. Hence, the inflow of money from investments will not be consistent with the outflow from payments of interests. This makes sense to pay off your debt by cashing out assets to have an actual saving of money.
- Take the help of your friends and relatives - Treat your friend and relatives as the last resort if you prefer to do so, as tapping your social network for funds can come to great help.
Managing debt with life insurance
Life insurance policy is one of the excellent ways among the different strategies to meet your debt in a responsive manner. If you are single or do not have children, having life insurance policy for you can be an excellent way to prevent your parents and other loved ones from unexpected financial constraint. If you have a family with children, you life insurance policy can come to great use in saving your family from the loss of your income as well as meeting your outstanding debts. The death payout can also meet the funeral cost that can run into thousands of dollars. In addition to your loss, your family stands to lose their home or car.
If you have the right life insurance policy, you can very well cover most of your existing debts along with meeting different necessary expenses after your death. It is you who can help protect your family from going deeper into debt.