4 Scenarios to Take Out a Life Insurance Policy Loan

Taking out a life insurance policy loan is something that some people do in order to get access to emergency funds. While life insurance is critical, sometimes you might need to borrow against the cash value in order to stay afloat. What are some different scenarios that would require you to take out a life insurance policy loan? Let's look at a few different situations that it could be to your advantage.

1. Debt Consolidation

If you are in bad shape with your credit card debt, it may be to your advantage financially to take out a life insurance policy loan. A policy loan will offer you a low interest rate that you can not get from a credit card. Unless you are in a promotional period with your credit card, you will most likely be paying over 20% interest. If you have racked up $20,000 or $30,000 in credit card bills, it is to your advantage to pay them off with a policy loan and then repay the life insurance policy. Your terms will be more flexible and you can pay it back as you get the money.

2. Starting a Business

After the banking crisis, lenders are more reluctant to loan money to start-ups. If you have a "can't miss" business idea, but cannot get a loan, this may be a good way to go. You will again benefit from the low interest rate and flexible repayment plan. Before you take out the loan, make sure that this is a very good business that you are investing in. Exhaust any personal savings or other methods of financing before doing this, but it could work in the right circumstances.

3. Facing Judgment

Sometimes you are riddled with bills that you cannot afford. A common example in today's society is with medical bills. Nearly everyone has some sort of medical bill that is outstanding. While you should not automatically borrow against your life insurance just because you have medical bills, if you are facing a judgment against you, it might be a good idea. Instead of having your wages garnished or racking up court costs, you could borrow from your life insurance with little trouble. This will allow you to pay off your creditors and avoid any trouble with your credit rating.

4. Investment Opportunities

Every now and then a golden investment opportunity will present itself. In those cases, it may be critical for you to come up with a few thousand dollars quickly. If you cannot secure financing from a bank, it may work to your advantage to use a life insurance policy loan. You can get the money you need at a very low interest rate and then pay it back when you realize your return from the investment. Make sure that the investment is worth the trouble before you go through this process. Messing with your life insurance policy should not be taken lightly, so put some extra thought into your actions in this case.

 


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