Borrowing against the end

I had a little trouble coming up with a suitable title for this entry.  “Borrowing against the future” didn’t make a lot of sense, as you’ll soon find out, so I went with the other ‘side’ for lack of a better term.  You’ll see why as I get further in.

I’ve been paying into a life insurance policy since about 1995.  At that time I’d been working with my last previous employer for about 2 years and for whatever reason they contracted with the company Mass Mutual and sent in a rep to talk to all the employees about life insurance.  Specifically about buying a whole life policy that would have the payments taken monthly out of our paychecks.  Certainly it seemed at the time a harmless venture, the policy wasn’t going to be used for at least 40 years (or more hopefully) and as long as I kept up the payments, I wouldn’t have to be concerned that there was going to be a lapse and I’d lose the policy entirely.  So I, like many of my co-workers, signed on.

Going ahead fifteen years, when the company got into financial straits, they decided to part ways with Mass Mutual and everyone that still had a policy got a letter in the mail saying that if they wanted to continue their relationship, the payments were no longer going to be deducted monthly from our pay, that we had to come to some sort of arrangement with MM to have the payments come from our personal checking accounts or some other method of payment.  So I went with a quarterly which wasn’t terribly inconvenient and continued paying into the policy religiously.  At some point, I apparently took a loan against the policy for about $800, but never paid it back.  Every quarter I’d get a statement in the mail, letting me know the current payment was being deducted from my checking account and on the back it informed me that a paltry sum was being added onto the loan I’d taken out many years ago.  The loan interest was merely 3.5% per year, so the interest was never very large on what remained.

Over the last ten years, I’ve been incurring credit card debt.  And like so many people I’ve been interested in getting out of that debt and have been attempting to use the ‘baby-steps’ method created by a guy named Dave Ramsey many years ago.  The only problem is, I haven’t been able to curb my spending enough to stop using the damned cards that caused the debt, and many of them have such crushing interest rates that the amount I’ve been plowing in for the last couple of years is always offset by the interest that is added on at the end of the month.  So (for example) if I pay the minimum on all cards and then the rest of the amount I’ve set aside on the one card with the largest interest rate, the interest on all the smaller cards adds up again and negates that balloon payment on the largest one.  I just don’t seem to get ahead.  If anything, for the last six months or so, I’ve been backtracking incrementally.  And when you’re in hock for 5 figures, that adds up over time.

So, getting back to the insurance policy, I hit on an idea.  Even though I’d started paying off the loan again, the amount of payments I’d made into the policy was fairly substantial.  Considering I’m currently paying about 5 times what I’d be paying in interest on a loan against my life insurance policy, it made sense to max out the loan possibility and pay off almost all of the credit card debt at once.  I’d end up with about $1800 on the lowest rate card, and I could have that paid off in about 2 1/2 months.  At that point, so as not to decimate my good credit score, I’d start cancelling the larger interest rate cards I have, and just keep the lower ones.  Then I could be paying the money I’d set aside for CC debt into the life insurance policy and make damn sure I didn’t get into hock again.

So that’s what I did.  It took about a week for Mass Mutual to send me a check, and another week for my credit union to clear it.  As of this morning, I’m going to be setting my plan into motion.  I just have to make sure not to get into any miscues in the meantime.  Fingers, toes and eyes crossed.

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