Should I Use Savings to Pay Off Debt?

 Posted on February 24, 2015 in Bankruptcy

Making ends meet when facing steep amounts of debt can be a struggle—especially if you have a family. The truth, however, is that most Americans are in some kind of debt, which often involves expensive mortgages, high-interest credit cards, or student loans.

Many Americans want to end the burden of debt as soon as possible, which is why some of them dip into their savings accounts to pay off lenders. This article will discuss whether or not this is a smart idea.

Weighing the Options

According to U.S. News, one way to reach a decision as to whether or not to pull money out of a savings account is to analyze the long-term effects of debt interest. If the overall interest rate will end up costing you more money in the future, making payments with savings may be a smart decision.

Making minimum payments can feel like an easy way to manage large debts, but it is a healthy practice to pay as much as reasonably possible. In addition to reducing the term of your debt repayment plan, this practice may improve your credit score. In this vein, using savings to make extra payments might wise.

However, some people’s lifestyles and financial goals do not allow them to use their savings. For example, young graduates who want to own a home must save for a down payment. With the average student loan debt exceeding $29,000, some graduates may wish to purchase a home before completing payments.

In other cases, parents have children who will graduate high school soon, and they want to save money to afford college tuition. In this instance, maintaining a healthy savings account may be a smart idea.

Bankruptcy Lawyer in San Antonio, Texas

If you are facing steep amounts of debt and would like to speak with an experienced San Antonio bankruptcy attorney about your options, contact the Law Offices of Chance M. McGhee for a free consultation at 210-342-3400.