Should I use savings to pay off my credit?
There are people whose savings for various purposes, such as emergencies or retirement, are so great that they can immediately pay off their remaining loan amount and live a life without credit.
There is no doubt that the loan must be repaid
Not paying a loan would leave a cent in their bank account, but without a loan, they would have financial security for both the present and the future. Of course, if the amount of the savings is greater than the remaining amount of the loan, there is no doubt that the loan must be repaid, as there are still living expenses when the loan is paid off.
Life without credit or financial security
Problems start when the two are equal, and you can’t decide what’s more important to you – life without credit or financial security. Yes, it is clear that mathematically you will lose money every month if you continue to pay off the loan, as it is known that the loan payment is not only part of the loan principal, but also interest.
But the feeling that you have a financial “airbag” that can save a handful of situations is just as great as the feeling of not being in debt. Maybe you are saving for some other important life events that you never want to give up just to pay off your loan? For example, a new car, a wedding, or a children’s education. Perhaps you are not feeling very stable in your workplace too, so are you willing to put money aside for unemployment?
However, most financial experts recommend that you first get rid of your debt because it really pays you money. It seems that few people know that any loan must be repaid as soon as possible, as otherwise large sums of money may have to be repaid in the form of interest payments. First of all, start by paying off the loans with the highest interest rates there, or because, as mentioned above, you will pay less in interest payments.
Better to pay a lower interest rate loan for a longer period of time
Better to pay a lower interest rate loan for a longer period of time than to pay a high interest rate loan for a long time, right? In this case, do not focus on the remaining loan amount but on the interest rate, as in most cases, the largest loans have the lowest interest rates and the smaller loans have the highest interest rates. Notable examples are mortgage and fast credit.
If you have so much savings to pay off your loan in full, pay it back and don’t worry that you won’t have anything to do afterwards because payday is closer than you think and may already limit your spending a bit, for example, preparing and eating at home, commuting to work, etc.
Leave the loans at 0% as the last one, because in that case the repayment period is irrelevant, ie it does not matter or you repay them within 1 month or 1 year, as long as its interest rate remains constant, ie 0%. You can make minimum payments to repay these credits without trying to repay a larger amount each month. Pay off your loans in staggered terms, that is, make the highest loan payments for the loan with the highest interest rate, but when it is paid off, pay the next loan at the highest interest rate in the same way until everyone is paid off.