Suppose you have a big financial target to achieve. It might be buying a car, planning to travel to foreign countries, or want to be the first person in your friend’s group to initiate saving money for the future. And you want to pay back your credit cards and student loans, too. So, what will become the first, payback of the debt or save for the future?
The solution to these questions depends on several aspects, which include your debt burden and your expenditure. Here are few things to remember before choosing whether to pay back your loans first, establish your savings now or do both together. Students can also avail another option, which is student loan consolidation.
High-interest rates of credit cards
According to the experts, the average interest rate of credit card is about 20% which is a huge amount. It seems normal if you calculate it on a daily basis, but it can cost you a lot if you borrow more money. Just think about it, if you borrow $2000, then you have to pay $200 extra with repayment. So, it is very important to pay back credit card bills first then you can think to save money for future goals. To avoid disadvantages, compare the price of things you are going to buy.
Why should you pay back loan first?
According to a survey, 68% of borrowers are in very bad conditions. The reason is that they don’t know how to manage everything perfectly. They can’t decide at the time. Moreover, if you are planning for a new car or a trip with your family, the lenders will observe that how much you are paying back the debt. If you can’t make repayments of loan or credit card, creditors will be at your door always, which is so much annoying and shameful. So, it is advised to pay back your loans first then start saving money. However, it is up to you how much you bowered and how much you have to pay for your credit card. If you don’t have any extra money for saving, don’t put your money in saving account, instead of that pay your credit card bill and loan first. If the interest rate is low and you think you will be able to pay back the loan at the time, then save some money in your saving account. Another situation is that, if you manage to save a lot of money and can easily pay installments, then this is the ideal condition to save money. There are many other options for saving money depending upon your loan, credit card bill and your income.
If you need help with debt consolidation or payday loan relief, contact Solid Ground Financial today!