I have been building my savings for several years and have tried very hard to prevent making withdraws from it. However, it is becoming increasingly harder and harder to not do so with the credit card debt I have accumulated to pay bills, as well as a 5 year Discover loan I had to take for a family emergency.
My first thought was to pay a good portion toward my Discover loan balance to bring my monthly payments down. However, after talking with Discover, they told me that the type of loan I have will not bring my payment down no matter how much I paid into my balance. I thought about paying my balance over time to an amount I could afford to then pay completely off. However, I would still continue to have to make this enormous payment to Discover Loans each month, which is affecting my overall monthly bills.
My current thought is to take part of my savings and make a substantial payment to each of my five credit cards and bring their balances down, which will allow me to handle Discover Loan’s payment much easier. But I still would be stuck with having to pay this huge payment for the life of the loan.
So, my dilemma is to use my savings to payoff Discover Loans completely, which will severely hurt me financially, or to use it to pay my credit cards and continue to make my monthly loan payment. Because I cannot afford to pay them both.
So, which approach should I take?
Thank you,
Bryan
Tue Feb 07, 2017 11:10 pm
oldguy Senior Member
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It depends mainly on the credit card interest rates - an the amounts on loans.
It sounds like you may be borrowing money at 20% and keeping it in a 1/2% savings account? Got to reverse that.
Tue Feb 07, 2017 11:24 pm
BHFinancial New Member
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Thank you so much for your reply.
Yes, you are close. My loan is at 18% for 5 years. However, I do have low interest rates on my credit cards, one as low as 3%. Because believe it or not, I have an excellent credit rating, 830 at one time. And I would like to keep it that way. But it is becoming increasingly difficult to keep this tug of war going. I feel like I am being pulled in two directions with Discover Loan's payment and my credit card payments. But like I said before, I can only afford to pay either my loan off or my credit cards.
So, are you saying to just bite the bullet and pay off my Discover loan because of its high interest rate instead of paying my credit cards? What about paying down my Discover Loan balance and then paying it off? It's just going to really deplete my savings if I pay my loan completely off.
Thank you,
Bryan
Wed Feb 08, 2017 3:33 pm
oldguy Senior Member
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quote: So, are you saying to just bite the bullet and pay off my Discover loan because of its high interest rate instead of paying my credit cards?
That's what I would do - right now you are paying 18% to borrow the money that is in savings and drawing only 1/2%.
Wed Feb 08, 2017 5:39 pm
BHFinancial New Member
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Thank you for your reply.
Okay, I will pay off Discover Loans from my savings, which I can then do a 0% balance transfer to pay my credit card balances as well. I think I just needed confirmation from someone in the finance field, such as yourself.
Thanks again,
Bryan
Wed Feb 08, 2017 7:19 pm
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