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Scenario: No Income, Best to Payoff Debt in Full?

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    Scenario: No Income, Best to Payoff Debt in Full?

    If one loses his job and no longer has any income at the moment, but has savings/EF for several months probably up to a year (earning little interest), is it better to payoff a credit card debt at once or slowly? Maybe use whatever interest earned and send to the CC company?

    In the past I've almost always paid in full. The debt is around 2-3% of my savings, so it's not very much I think, but I'm not sure exactly how to plan this out.

    The credit card APR is 17% by the way. I've also halted any CC spending of course, and hopefully will be able to find some job in the near future.

    I would appreciate any feedback and advice. Thanks for your time.
    Last edited by FX8426; 03-18-2010, 08:49 AM.

    #2
    Liquidity is more important than balance sheet when times are tough IMO

    meaning keep the debt

    when times are good, focus on the balance sheet, getting assets higher (savings) and liabilities lower (pay off debts).

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      #3
      I would hang on to the cash.

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        #4
        I agree 100% with jIM.

        Credit card debt is really bad, but cash is more important to get you through this rough spot. Also, many people have recently had their credit limits dramatically reduced (or accounts closed) after paying off debt all at once, which then leaves them without the cash or access to credit. You definitely don't want that to happen.

        As soon as you find that new job, hit the high-interest credit card debt hard though to try and make up for lost time.
        Rock climber, ultrarunner, and credit expert at Creditnet.com

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          #5
          Hold on to your cash until you land a new job.

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            #6
            While I agree with the others, I'm curious what amount we are talking about, since you have only mentioned the percentage in comparison to your savings.

            $200, $2000 or $20,000 it does make some difference when giving advice.
            My other blog is Your Organized Friend.

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