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For the first time in about a decade we incurred some interest bearing debt in the form of a car loan, its under 10k simple interest and a payment we can manage at the same time we had some other things happen and had to use our CC to pay some home related things so we have a relatively high balance (4k) on that CC BUT its no interest for 13 months.
Since its been a LONG time that we have been in a situation like this I am undecided on my best course of action.
I can take funds from our emergency acct and payoff one or the other or both but that would take that account below my safety level
I can safely pay $200 month ( but not more) for 12 months which brings the CC down by a little more than half then lump sum it before it changes to interest but if I choose that route things need to go relatively perfect for a year.
the car loan is at 6.9%
my emergency acct is in a CD earning 5% it still has 3 months to maturity
or perhaps wait until it matures and pay off the zero interest card but that leaves us with interest bearing car loan which is better than CC debt at 18+%
We indicates a couple.
If you are working with margins so narrow that you can pay 200/month not more it is time to check very penny of your spending and cut back where you can until these debts are paid off and get second part time jobs.
I forgot to mention that the no interest CC DOES NOT have accrued charges so IF there is a balance after the promo period only the remaining balance is subject to interest
I forgot to mention that the no interest CC DOES NOT have accrued charges so IF there is a balance after the promo period only the remaining balance is subject to interest
It is debt owed and you do not know what other emergencies are on the horizon.
Don’t use your emergency savings to pay off the zero interest credit card debt. Why? Because if you do and an emergency happens, you’re going to use the credit card for said emergency and pay much more than 0% interest. Instead, aggressively pay it down while it’s still at 0%, with a goal of paying it off completely before the 0% period expires. If you’re unable to pay off completely in this time frame, then go ahead and use part of your emergency fund to pay it off at the end of the 0% promo period. Then build your emergency savings up back to a level that’s comfortable to you and then chip away at the car loan.
Don’t use your emergency savings to pay off the zero interest credit card debt. Why? Because if you do and an emergency happens, you’re going to use the credit card for said emergency and pay much more than 0% interest. Instead, aggressively pay it down while it’s still at 0%, with a goal of paying it off completely before the 0% period expires. If you’re unable to pay off completely in this time frame, then go ahead and use part of your emergency fund to pay it off at the end of the 0% promo period. Then build your emergency savings up back to a level that’s comfortable to you and then chip away at the car loan.
I feel like this is the logical as well as best way of handling this BUT I gotta say after over a decade of ZERO debt, having any feels like a chain around my neck and my impulse is to just pay it off
I feel like this is the logical as well as best way of handling this BUT I gotta say after over a decade of ZERO debt, having any feels like a chain around my neck and my impulse is to just pay it off
Then you and your spouse can pick up second jobs, with all the money going to eliminate the debt.
Going forward I would consider setting up sinking funds for automobiles and home repairs/replacement. It's only a matter of time something will need repairing and IMO not considered an emergency expense.
Going forward I would consider setting up sinking funds for automobiles and home repairs/replacement. It's only a matter of time something will need repairing and IMO not considered an emergency expense.
I am unfamiliar with the term sinking funds?
I tend to agree cars are not an emergency until they are though.
we do have funds set aside for various things it was just the double whammy that threw us for a bit of a loop.
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