How Do You Borrow Some Money to Get Out of Debt?


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Ways to borrow some money to pay off debt include borrowing against life insurance policies and taking out home equity loans, according to The Motley Fool. Some life insurance policies have cash values allowing policyholders to borrow against that value. Home equity loans allow homeowners to borrow against the equity in their homes to consolidate debt or make home improvements.

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Another way to borrow money to pay off debt includes borrowing money from 401(k)s, explains The Motley Fool. Many 401(k)s allow plan holders to borrow up to 50 percent of the value of the account and interest rates on the loan run one to two points above the prime rate. However, loans against 401(k)s cause borrowers to lose tax-deductible contributions and tax-deferred compounding.

Consumers burdened by high-interest credit card debt may consider home equity loans, states CNN Money. The interest rates on home equity loans are often half of the interest rates charged by credit card companies. The interest paid on home equity loans is tax deductible; however, borrowers can only deduct interest on the first $100,000 of the loan. The drawback of home equity loans is if the borrowers do not pay the loans back, they face the prospect of losing their homes.

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