NWR loan question

posted 3 years ago in Money
Post # 3
Member
71 posts
Worker bee
  • Wedding: June 2013

The answer rests entirely with you.  It’s a good idea PROVIDED THAT you don’t rack up any more credic card debt.  Paying off the CC with the loan is not licence to go out and spend more.  If you pay off the credit card, can you cut it up and cancel the account?

Post # 4
Member
8909 posts
Buzzing Beekeeper
  • Wedding: August 2013 - Rocky Mountains USA

@Laurenplusalex:  Is the school loan interest-free or low-interest, at least while you’re in school?  If so, I would do it because (as you know) credit card loans are extremely not interest-free.  Just remember that you’ll have a new loan to pay off in the future…

Post # 7
Member
71 posts
Worker bee
  • Wedding: June 2013

@Laurenplusalex:  If you can stick to using cash or debit for expenses and keep a (low limit) CC for emergencies, that should be fine.  It sounds like you are committed to fixing your finances so best of luck.  btw, here is a blog I’ve been following for a couple of years now: http://www.givemebackmyfivebucks.com/  It’s written by a woman from Vancouver who dug herself out of a pile of consumer debt and is now doing pretty well.

Post # 8
Member
10384 posts
Sugar Beekeeper
  • Wedding: September 2010

@Laurenplusalex:  Don’t close a card, unless you absolutely think you can’t control your spending! Since you’re young, that will ding your credit big time to close one of your only accounts. It’ll also decrease the amount of revolving credit available to you, which in turn will make any purchase on your lower credit limit card work against you more.

Post # 9
Member
11300 posts
Sugar Beekeeper
  • Wedding: August 2013

@crayfish:  This! Don’t close your card! Just cut it up.

It’s probably a really terrible idea, but your cc rate is 23% and the loan is only 6.8%…I would do it and get that pressure off of your back for right now.

Post # 10
Member
10491 posts
Sugar Beekeeper
  • Wedding: January 2011

If you are able to use the money smartly, and don’t have interest payments while you’re in school, take as much as you can.

You can pay off your debt and invest the rest, putting it into something safe and pull it as you need it.

I don’t know if loans get forgiven where you are, but here the larger the loan the more that can be forgiven.

Post # 11
Member
3077 posts
Sugar bee
  • Wedding: February 2015

@AB Bride:  I will disagree with taking as much as you can & investing it.

Since you are struggling with changing your spending habits, I think taking just enough to cover school & clear your credit card debt is a good idea. Investments are tricky & I haven’t learned about them enough to be able to suggest doing them, but the ones that will be worth the interest you’re accruing on the loan are going to be more volatile. Taking out a loan to invest it is a move for a financially savvy person, not for someone struggling with getting a grasp on their finances in the first place.

Also, echoing PPs- don’t close the card. It’ll hit your credit, increase your debt to available credit ratio (that’s not what it’s called officially but I’m blanking right now), and decrease your overall available credit.

You’re smart to have thought about using the loan with the MUCH lower interest rate to pay off your card! Very good move =)

Post # 12
Member
920 posts
Busy bee
  • Wedding: June 2015

I have personally done this before to help alleviate some of the debt I had. I felt better knowing it was more consolidated. I did make early payments on my student loan each month also. It makes complete sense to use a lower interest borrowing source to pay higher interest debt. 

However, I didn’t change my spending habits and of course racked up more debt onto the credit card I paid off with the excess of my loan. Now I have graduated and am paying student loans back and paying credit cards off.

So make sure you are committed to paying down the loan and not spending on unnecessary things. Good luck!

 

Post # 14
Member
10491 posts
Sugar Beekeeper
  • Wedding: January 2011

@soontobemrsm11:  Safe investments.  Many student loans don’t accrue any interest while someone is in school.  There are investments where the principle is guaranteed, so it’s 100% that the OP would be better off.

Ie.  Take a $10000 loan, no interest until the OP is done school.

Lets say CC debt is $5000.  $2000 is needed for school.  A $7000 loan is therefore all that is needed.  By taking the extra $3000 and investing it at 2.5%.  The OP would come out $230 ahead without even factoring in monthly or however often interest is compounded on the investment.  That could help reduce the amount owed once the OP graduates.

Add in the fact that $200 might be forgiven on a $7000 loan, but $500 for a $10000 loan, and it starts to make even more sense, as there are often cut-offs.  Now instead of just being $230 ahead, the OP is $530 ahead.

My numbers may be way off, but it shows why it’s a good example as long as someone keeps it in safe investments, isn’t tempted to spend more than they would otherwise, or accrues interest on the excess loan amount.

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