Should I Save or Pay Off Debt? Here is How to Decide
January 28, 2021 | Louis Tully
Should I save or pay off debt? That is a question many of us ask ourselves.
Imagine: the last car payment, the last mortgage payment, the last credit card. All of these paid off, and you have zero debt.
This is the American dream. But number of people who can afford to pay their debt off is very small, and those people who don’t have any debt are probably quite wealthy. So, is it worth paying off all your credit cards and all other debts or should you start saving? In the long term, what does it mean?
Should I Save or Pay Off Debt? Here is How to Decide.
Before making a decision, it’s always best to know the facts. You will need to write down some information on a piece of paper, for you to be able to do the math.
1. How much are you paying for your loans?
Do this by calculating only the interest rate until the end of your credit. So, if you are paying $100/month, how much of that is the interest?
Then calculate how much interest you will be paying during a year’s time.
2. Find out how much interest you would obtain on a savings account.
Do some research and talk to different banks and financial institutions, in order to figure out how much money you could obtain from the interest of a savings account. This may make it easier to decide should I save or pay off debt.
3. Set some goals
If you don’t know what you want to do in the near future and you are still asking yourself, should I save or pay off debt, there is no way for you to be fully aware of when you will need money, and how much of it you will need.
Being debt free is a great goal, but if this will mean that until you cover your debt you won’t be able to do things that are important to you or your family, the advantages start to look less like advantages and more like disadvantages.
4. Consider the penalties for paying your loans ahead of time
Banks never lose. It’s a given. This is why they survive no matter how bad the economic climate is. Most banks will have a prepayment penalty which is a fee that should be stated in your contract. They do this to discourage people from paying loans early, meaning you would pay less interest. Therefore, the banks make less money off your loan.
The value of this fee varies from creditor to creditor and it depends on the number of years that you had the credit for. If the credit is less than a year old, the fee might be higher. So, again ask yourself, should I save or pay off debt?
5. Do the math
After you learn how much interest you are paying and how much of this you can avoid, you can subtract the prepayment penalty, and find out how much money you would be saving in interest.
Most savings accounts don’t have a consistent interest rate and it probably doesn’t match what the bank is charging you in interest.
This information might not give you much hope, but we do have an alternative.
Instead of viewing this as a black and white decision, why not make it gray. If you are wondering should I save or pay off debt, why not try to do both. Aim to pay off debt faster, while saving some money. This will give you a safety net in case an emergency occurs and will help you get out of debt faster.
If, for whatever reason, you find yourself in need of money fast, there are other options available that don’t have anything to do with banks. One option is a title loan with New Mexico Title Loans Inc., one of the most reliable lenders in New Mexico.
What are Title Loans?
Car title loans are a form of loan that you can easily obtain in a short amount of time. You can also repay it much faster than you would repay a bank loan. Furthermore, you can obtain one no matter your credit score. Good or bad credit is not important, as they work with people, not numbers.While you are required to use your car as collateral, you can still drive it, as long as you are making payments. Borrowing up to $10,000 is an option, with repayment to be discussed and arranged to suit your needs.
How Can I Obtain Title Loans Online?
There is an easy process to be followed when obtaining a title loan. Once the process is completed you will be able to use the money however you want.
- Go to the New Mexico Title Loans, Inc. homepage
- Fill out the request form with your information
- In a short time you will be contacted by a representative who might have additional questions and who will happily answer all your questions
- During the phone conversation you should write down the documents that you will later need
- Meet with the representative at a convenient title loan store location, and bring your car, a state ID and your lien-free car title (a proof that the car is in your name and that you didn’t use it to get another loan)
- The representative will verify your documents and inspect your car to determine its value
- After the process is complete, you will be informed about the amount of money that you can receive. This amount will be transferred to your bank account in less than a day.
It is always good to know that you have a safety net, even if that safety net comes in the form of a title loan. This may help to answer your question, should I save or pay off debt? If you decide to get a New Mexico title loan online, simply visit New Mexico Title Loans Inc. to get started.