Here are five steps to start you on the path to getting rid of your debt:
So, in most cases, you can't use a 401k hardship withdrawal just because you want to pay off your credit card balances. In this case, you'd be required to take out a 401k loan.
Check the interest rate section of your statements to see which credit card charges the highest interest rate, and concentrate on paying that debt off first. Pay off the card with the smallest balance first, then take the money you were paying for that debt and use it to pay down the next smallest balance.
You can often negotiate better interest rates, payment dates, and even long-term payment plans and settlements on your credit card debt. ... It's often possible to negotiate terms, interest rates, and payments on credit card debt. You can also try to negotiate a settlement of the amount you owe.
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Get professional help: Reach out to a nonprofit credit counseling agency that can set up a debt management plan. You'll pay the agency a set amount every month that goes toward each of your debts. The agency works to negotiate a lower bill or interest rate on your behalf and, in some cases, can get your debt canceled.
Paying off debt may feel like a never-ending process. ... This may make you wonder, “should I cash out my 401k to pay off debt?” Cashing out your 401k early may cost you in penalties, taxes, and your financial future so it's usually wise to avoid doing this if possible.
Withdrawing funds from your IRA to pay credit card debt shouldn't be your first option. ... Roth IRAs also penalize early withdrawals. There are better alternatives, such as transferring credit card balances to a lower-interest card or taking out a debt consolidation loan.
A hardship distribution is a withdrawal from a participant's elective deferral account made because of an immediate and heavy financial need, and limited to the amount necessary to satisfy that financial need. The money is taxed to the participant and is not paid back to the borrower's account.
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Credit card debt is typically unsecured debt, meaning a credit card company can't come after your assets if you fail to pay what you owe. Since credit card companies don't have this recourse, many are willing to negotiate a settlement with customers to recoup as much of the debt as possible.
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