However, it
all depends on your personal circumstances. For example, if you constantly do
require emergency funds to cover your monthly expenses then using your savings
account to cover your expenses might make sense. In such case it would be
recommended to see what savings, sacrifices could be made in your monthly
budget in order to ensure that you don’t need regularly to dig into your
savings account or borrow even more money.
But if you
do not spend more than you get, then in this case if you do have a choice to pay
off your outstanding debt using your savings account then in most cases it
would save you money significantly. It all depends on loan/credit card and
savings account interest rates. If loan/credit card annual interest rate is
significantly higher than the interest on your savings account (which in most
cases will be) then if there is enough money in your savings account to pay off
debt completely it would save you money. Even if you do have emergency
circumstance in the future it still makes sense to have minimum or no debt as
it costs you lots in interest payments. That is why it is important to clear
debt and build savings account for such circumstances. For most people it is
hard and difficult process but it is very likely to pay off in the future.
Here is an
example how much your debt would cost you if you choose not to pay it off when
possible.
5000 GBP
Credit Card Debt at 20% Annual Interest = 1000 GBP* annual interest payment
5000 GBP Savings
Account 1.5% Annual Interest = 75 GBP annual interest earned
*final figure will depend on how much money paid in during the year e.g. minimum payment or more
*final figure will depend on how much money paid in during the year e.g. minimum payment or more
That’s
staggering 925 GBP lost in interest payments. So it makes sense to clear debt
if it is possible and then build your savings account without debt.
There are
cases when it makes sense not to use your savings account to pay off your debt.
This is when interest rate of your debt is equal or less than your savings
account.
Do you seek funds to pay off credits and debts? Do you find yourself in a bit of trouble with unpaid bills and don’t know which way to go or where to turn? What about finding a reputable Debt Consolidation firm that can assist you in reducing monthly installment so that you will have affordable repayment options as well as room to breathe when it comes to the end of the month and bills need to get paid? Wesley Loan Company is the answer. Email (wesleyloancompany@yahoo.com)
ReplyDeleteWe offer the following types of loans
*Debt Consolidation Loans
*Business Loans
*Personal Loans
*Home Loans
*Car Finance
*Commercial Loans
*Investments Loans
*E.T.C
Note: We give you loan with a low interest rate of 2% and loan duration of 1 to 20 years to pay back the loan (secure and insecure). Do not keep your financial problems to yourself in order for you not to be debt master or financial stress up, which is why you must contact us quickly for a solution to your financial problems. It will be a great joy to us when you are financially stable. Email {wesleyloancompany@yahoo.com}