Let’s face it-credit card debt is one of the most stressful burdens many of us carry. It creeps up slowly, often starting with small purchases, and before you know it, you’re staring at a balance that seems to never go down no matter how much you pay. The high interest rates, late fees, and never-ending minimum payments can feel like a never-ending cycle. If you’re in that boat, know this: you’re not alone. And if you have a Variable Universal Life (VUL) insurance policy, there may be a smart way out.
VUL insurance is more than just a safety net for your loved ones. It’s also an investment tool. And in times of financial distress-like trying to pay off credit cards-it can serve as a lifeline.
In this article, we’ll walk through how and when it might make sense to withdraw cash from your VUL to settle your credit card debt, while also making sure you don’t jeopardize your long-term financial goals.
What Is VUL and How Can It Help?
Variable Universal Life insurance is a type of life insurance policy that has two parts:
- The insurance portion, which provides a death benefit to your beneficiaries.
- The investment portion, which grows over time through funds chosen by you or your provider.
What makes VUL unique is its flexibility. Once your policy has built up sufficient cash value, you can make partial withdrawals or policy loans against it-without having to cancel your policy. That cash can be used for any purpose, including emergencies like credit card debt.
When Credit Card Debt Becomes Too Much
It’s easy to underestimate how quickly credit card balances accumulate. A ₱5,000 medical bill here, a ₱10,000 emergency repair there-and before long, you’re facing ₱80,000 or more in revolving debt. Add in 24% to 36% annual interest, and your minimum payments may barely cover the interest alone.
That’s where the cash value of your VUL policy comes in. If you’ve been paying into your VUL for a few years, there’s a good chance you’ve accumulated enough value to make a serious dent in your credit card debt-or even wipe it out completely.
A Personal Example: Mark’s Turning Point
Mark, a 38-year-old father of two, found himself in over ₱120,000 in credit card debt after a series of unforeseen expenses during the pandemic. Every month, he struggled to make the minimum payments, watching interest eat away at his income.
Then he remembered the VUL policy he started at age 30. After checking with his insurance provider, he learned that his investment portion had grown to ₱250,000. With guidance from a financial advisor, he withdrew ₱130,000-enough to pay off his credit cards in full.
Today, Mark has no credit card debt, and he continues to rebuild his VUL investment while redirecting what he used to pay in interest toward savings for his children’s education.
How to Use Your VUL to Pay Off Credit Cards
If Mark’s story sounds familiar, here’s a step-by-step guide on how to do something similar-responsibly:
1. Check Your Cash Value
Contact your VUL provider or log into your online portal to see how much cash value your investment has accumulated. You may only withdraw from the investment portion-not the life insurance portion.
2. Consult Your Financial Advisor
VUL withdrawals have implications. They may:
- Reduce your future earnings potential
- Decrease the value of your death benefit
- Trigger policy charges or fees
A licensed financial advisor can help you make the best choice between a partial withdrawal and a policy loan, depending on your financial situation.
3. Calculate the Minimum Amount Needed
Don’t withdraw your entire investment. The goal is to relieve your financial burden, not erase your progress. If you owe ₱100,000, take out only that much-or less if you can negotiate or consolidate some of your debt.
👉 Rule of thumb: Try to leave at least 50% of your investment untouched. This ensures your policy can continue growing and keep your life insurance active.
4. Use the Funds to Settle the Debt Immediately
Once the funds are available, don’t delay. Pay off your credit card balances in full to stop the interest from piling up. Request written confirmation from your credit card company that the balance has been cleared.
5. Rebuild Your Investment and Avoid Repeating the Cycle
After freeing yourself from the heavy burden of credit card debt, redirect your monthly income to:
- Continue your VUL premiums
- Rebuild your investment value
- Create an emergency fund so you don’t rely on credit cards in the future
Pros and Cons of Using VUL for Credit Card Debt
✅ Pros:
- Fast access to funds you already own
- Eliminates high-interest debt
- Stops the debt cycle
- Doesn’t require a loan application or credit check
❌ Cons:
- Reduces your long-term investment potential
- May affect your policy’s life insurance benefits
- Possible fees or surrender charges
- Risk of policy lapse if mismanaged
When It Makes Sense to Use Your VUL
Using your VUL to pay off credit cards isn’t for everyone. But if you’re in a financial pinch where:
- Credit card interest is swallowing your income
- You’ve tried budgeting and consolidation with no success
- You have no other low-interest options
… then a VUL withdrawal might be a smart and timely solution.
Just make sure to think of it as a one-time lifeline, not an ongoing habit. Once your credit card debt is cleared, commit to rebuilding your financial foundation so you don’t end up in the same situation later.
Final Thoughts: Financial Relief Without Losing Sight of the Future
Dealing with debt is one of the most emotionally and mentally exhausting parts of adult life. Credit card debt, in particular, feels like a weight you carry with you constantly. But you have options. If you’ve invested in a VUL insurance policy, you’ve already taken a step toward financial security-and it can now work in your favor during a tough season.
Just be wise. Don’t zero out your investment unless absolutely necessary. Take only what you need, settle what must be settled, and rebuild. You’ll sleep better, stress less, and find renewed confidence in your financial future.
Because at the end of the day, your money should work for you-not the other way around.