Protect Your Retirement Accounts

Consumers look for many creative solutions when they realize they must finally address their overwhelming debt problem. Many must seek various means to consolidate their loans or utlize another debt relief alternative - debt settlement. The idea and practice of debt consolidation are simple. You join all outstanding debts into one place to manage the debts more easily and to pay them monthly more affordably. Some tap their retirement funds to consolidate debts, but they jeopardize their retirement in the process. Consumers would be better served to use debt settlement instead to reduce their debt and avoid risking their future.

Debt consolidation loans may be borrowed against one's retirement funds. Consumers with money invested in their company's 401(k) can borrow up to 50 percent or $50,000 of their balance. Some financial advisors claim the biggest benefit of this is the interest paid on the loan goes into their retirement fund, not to a lender.

The risk of debt consolidation with retirement funds is you lose your retirement fund if you default. Employers could also demand repayment in full if you are fired. You must also report the loan as income on your tax return if the loan is not repaid within a certain time frame.

It may be much easier, and fiscally safer, to work with your creditors to repay a smaller part of your entire debt burden. Many creditors forgive part of your debt to receive some monies rather than nothing at all. The creditors forgive a percentage of the debt in return for a lump sum of the remaining portion. They allow borrowers time to save up a large percentage of their debt and repay the lower amount when they have saved enough.

The risks of debt consolidation with retirement funds are too dangerous for most consumers. Debt settlement is a much safer and a quicker debt- relief option.

Author bio: Brian Williams, a graduate of the University of Texas at Arlington, has 11 years’ experience writing and editing at daily newspapers in Texas. Having worked his way through college and experiencing the transition to professional life, Brian understands how credit affects people’s lives. Learn more about debt consolidation alternatives from Brian through Credit Solutions. Credit Solutions is your alternative to debt consolidation.

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