Consolidating debt into your mortgage good idea dating preparation image style
In fact, there are a few common methods people use to help them get out of debt that can end up doing even more harm than good.Here are a few things you may want to think twice about in your quest to become debt free.If the loan is not paid in full it will be treated as a distribution.Distributions are taxable and if you’re under age 59.5 they are subject to an additional 10% early withdrawal penalty.Again, it seems like a good strategy at first, but there are plenty of problems with this idea.First of all, this money is meant for retirement and it needs time to grow.The other things to consider are the consequences if you leave or lose your job.Most of the time these loans will need to be repaid in full within 60 to 90 days after termination.
If you have an old 401(k) from a past job it’s tempting to cash it out and use the money to pay off debt.
Now if you fail to make payments the bank is going to take your house away.
If you can’t repay the home equity loan or line of credit you might be forced to sell the house so the bank can recover the money.
Credit cards are unsecured meaning there is no collateral backing the card.
If you fail to pay off your credit card you might have to put up with collection calls and damage to your credit score, but that’s about the extent of it.
Not long ago using the equity in your home to finance everything from vacations to consolidating debt was all the rage.