You may have always considered yourself someone who took proactive approaches when it came to handling your finances. You may have saved, budgeted and taken other actions that would help keep you on track with expenses. However, unexpected situations can hit anyone, and you may now find yourself with considerable debt due to medical expenses, job loss or any number of other significant life changes.
As with most California residents, you may have a desire to get out from under your debt as quickly and painlessly as possible. As a result, you may consider various ways in which to accomplish this task. Though different options do exist, you may want to think about the potential future implications before jumping in with a seemingly quick fix.
Using retirement funds
You may consider the idea of using funds from your 401(k) to cover the debts that you have accrued. Because the money in the account belongs to you, you may think that it makes sense to use those funds to get your current finances back on track. However, you cannot simply withdraw funds from a 401(k) without consequence.
In order to access these funds, you must borrow the money and pay it back with interest. Additionally, your employer may prohibit more contributions to your account until the borrowed amount has been reimbursed. Plus, if you leave your job for any reason, you would have to pay back the amount borrowed immediately.
Offers of credit card balance transfers may seem like a viable and beneficial way to address existing debt. However, this option may not work for you if you do not have the means to pay back the debt in a timely manner. Transfers typically take place because a new credit card has lower introductory rates, but if you do not eliminate your debt before that time period ends, you could still end up in the same situation.
Rather than looking for a quick fix, you may wish to consider settling in for an option that may take more time but could provide greater long-term benefits. Bankruptcy often has the ability to help individuals struggling with substantial debt, and other legitimate debt relief options could also potentially apply to your case. In order to determine the route that may work best for your circumstances, you may wish to obtain information from local legal resources.