Should I repay debts or save?
I think it depends on the interest rates you are paying for your debts. For example, if you have credit cards with high interest rates then it probably makes sense for you to pay down your debt. Or if you student loan payments that are near the rate of inflation, I would save. | 11.19.10 @ 01:50
Is it too risky to pull from my savings to pay some of my debts? I have both student loans and a credit card. How do I figure out which is worse? | 11.19.10 @ 01:58
The key in my mind is the difference between what you are making on your savings and paying on your debts. For example, if you are earning 1% on your savings and paying 20% on your debts a payment of £1,000 towards your debts would save you £190 per year in interest savings.
Of course you should always have something saved for emergencies so the amount you should take out should consider your income, stability of income, and what you would have remaining in your savings or can quickly liquidate into cash. | 11.19.10 @ 04:17
The answer is to try both. its important to have a cash reserve to fall back on so that you dont rely on credit cards especially when your credit limit can be reduced or withdrawn at any time. if you have a good credit record you should look at a balance transfer deal. the 0% deals are good if you can repay the full debt in the 0% limit but this can sometimes be only 12 months and with a 3% average fee to move balances you might be better to look for a transfer rate "for life" where you could pay a typical 4-4.5% on a balance for as long as it takes to repay it which will work out cheaper in the long run.
people have a different view of how much cash you should keep but you need to consider how long your current cash would last if you lost your job/income. a good starting place is 3 months income or outogings (the higher of the 2) as a safety cushion. | 12.07.10 @ 18:30