| Paying off a credit card loan (residue from a home loan) |
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nemoryer
Full Member
Cash: $ 13.35
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Location: wa
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| Paying off a credit card loan (residue from a home loan) |
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When I paid off my home loan last year, there was a $7k residue that was leftover from the loan so I transferred that into a 0% credit card.
The credit card has expired in April and am told it will revert back to anywhere between 8.99 to 10.99% APR.
I do not like credit card debt. In fact, I opened the card solely to transfer the balance of my home loan. I have not used the card for purchases, etc.
Now that there will be a small monthly interest, I am thinking of paying it off and withdrawing that amount from my 401(k). Just so I don't have any credit card debt. Is this a prudent decision?
Another scenario, is I could also transfer this balance into a brand new 0% balance transfer card to which there will be a 3% fee.
I really don't know how to get ahead of this dreadful racket.
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Thu Apr 23, 2009 3:41 pm |
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littleroc02us
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My question would be, "Why don't you have the money to pay off the 7K if you paid off your home?" What are you using the money for that you were paying your mortgage with? As for the 401K money, I wouldn't touch it because you will lose your progress from the principle. If you had a Roth IRA you could withdraw whatever you contributed and not the interest you gained to pay off the debt and then replace it later. Yes, transfer the money to a lower interest credit card but pay it off asap. Being debt free will give you freedom to make your money work for you. Good luck.
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Thu Apr 23, 2009 7:37 pm |
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Jade456
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Location: Las Vegas
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| home loan |
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Out of the two, it would be better to have a home loan that you can write off the interest for on your taxes than credit card debt.
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Thu Apr 23, 2009 9:44 pm |
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nemoryer
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Location: wa
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| Paying of Credit Card Debt - RESPONSE |
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The money I originally got to pay off the loan was from a Profit Sharing Plan distribution from an old employer. I didnt' have ENOUGH to pay off the loan, but I just wanted to pay off the mortgage so I would have title free and clear. I know, dumb idea, but at the time, there was a bank who loaned me the balance at 0% balance and free transfer. It was the best of all worlds.
BUT, unfortunately, the time has come for the 0% interest to end.
I hate credit card debt that is why I am considering withdrawing from my 401 to pay off the loan. I am 62 years old and am qualified to make a withdrawal without penalty.
THO I am also considering your suggestion of finding another 0% card. I just am APPREHENSIVE in paying the 3% transfer fee. I cannot find a card with NO TRANSFER FEE.
THANK YOU SO MUCH.
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Thu Apr 23, 2009 9:45 pm |
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oldguy
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Location: arizona
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quote:
I hate credit card debt
I just wanted to pay off the mortgage so I would have title free and clear
I do not like credit card debt
withdrawing that amount from my 401(k). Just so I don't have any credit card debt.
When you make your investing decisions based on emotion, you are likely to get some very wrong results. For example, if you use all of your cash to pay off your real estate, and then you need money to live on, you will be in a bad situation - a lender cannot give you a loan when you are out of work. A far safer position would be to have a $100,000 mortage (costing $600/m) and a $100,000 cash account (paying you about $600/m).
I'm age 70, been retired for many years - I have a recent 30-yr mortgage on one rental house and I am considering getting another one, <5% capital is at a lifetime low rate. Throughtout my working life I have maintained large loans on my real estate and used that money for investments - more houses, stocks, etc - it has been a powerful tool.
Don't think of 'debt free' as a goal, the goal is to add to your net worth - debt is a tool to help you do that. (I don't mean foolish revolving debt such as store credit cards, etc - I'm talking about fixed rate amortized long term loans).
Have you considered refinancing your house and removing several 100 thousand $? As i said, <5% is a near-lifetime low. And you always have the option to prepay it if you happen to get another "hate" attack? 
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Sat May 16, 2009 5:01 pm |
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