8 Steps To Kill Off Crippling Debt With Pension Release
It seems the world’s love affair with borrowing money has turned very very sour.
They say it’s the best of times. We’ve never had it so good. We have more income. We’re better travelled. Our homes are worth more. We have more possessions. We’re wealthier. But are we?
You see, it’s the worst of times too. The world is deeper in debt than any time in history. Countries owe trillions and so do the people within them. Many students leave higher education massively in debt. Committed to a life of owing money.
Incredibly, people today use PayDay loans at horrendous interest rates to buy food. Consigning themselves to paying interest for years after they’ve finished eating. It can’t be right.
You have to change your thinking.
THINK: It doesn’t matter what it’s called, it’s a debt!
Don’t be fooled by the labels. Mortgage, loan, overdraft, finance, credit card or store card. It’s not even relevant they’re all charged at different interest rates.
They are all debts!
And being in debt seriously damages your wealth.
As what you own and what you owe are connected, it’s vital to consider all your money when you’re in debt.
Being in debt isn’t wrong. Mortgages and loans are perfect for helping you secure the things in life you want. Like homes and cars. But just because you can afford the payments doesn’t make it right to borrow, when you could have a really good alternative. Your pension fund.
Before you sign on the dotted line, consider whether you’ll be better off using money you already own, compared to taking on more debt.
Here’s the point.
Over the last few years, the average pension fund has been growing at 3% to 5%. The cost of almost all debts has been higher. So whilst your pension fund could be slowly increasing in value, when you’re in debt, you’re going backwards, fast, and your personal wealth could be suffering in the process.
It’s like trying to crawl up a down escalator. And that’s really hard work.
Amazingly, ‘mainstream’ debts like overdrafts and credit cards could be charged at 5 times higher than average pension fund growth. And store cards and short term loans could cost anything from 10 times to a staggering 1,000 times as much. Talk about highway robbery!
The solution is obvious. Unlock money from your pension that’s growing at a low rate, and use it to repay your expensive borrowing.
Your retirement income doesn’t have to suffer, as you’ll see if you follow these 8 steps below.
8 steps to kill off crippling debt with pension release.
- Add up the total monthly amount you’re paying to service all of your debts, including your mortgage, and this is your ‘starting figure’.
- Use pension release to withdraw tax free cash and use it to kill off your highest cost debt.
- Once that’s gone, repay your next highest cost debt and so on, until your tax free cash is fully spent.
- Set up a monthly repayment to your pension of at least 5% of your pension release, so your pension fund continues to build you an income for when you decide to retire.
- Maintain your ‘starting figure’ in step 1. above and increase the amount you’re paying to your highest remaining debt, so you’ll clear it much quicker than before.
- When it’s gone, direct your ‘starting figure’, less the amount your paying to your pension, to your next debt, and so on, until you’re left with your lowest cost debt, which is likely to be your mortgage.
- Every six months, compare your mortgage rate and your pension growth. If your mortgage rate is lower, make overpayments to get rid of your mortgage more quickly. And if pension growth is higher, save more to build your retirement income.
- Once a year, review your mortgage and your pension, and if switching either or both can improve your position, take action.
Pension release really can speed you out of debt quicker than you thought possible.
But only if it’s right. You see, some pension schemes provide such valuable benefits, if you take pension release, you may lose some or all of them, and that would be really bad news. So before you blindly proceed, you must thoroughly check your pensions with an independent pension specialist, to see whether it’s a good idea to release some tax free cash from your pension for debt repayment.
Complete the form above to see how much tax free cash you could get using pension release.
If you’re a mortgage broker or loan broker, you could do more business by helping your clients release cash from their pensions »