Borrowing Question

iVillage Member
Registered: 03-27-2003
Borrowing Question
3
Fri, 12-30-2005 - 9:49pm

Well, I just set up my budget and what a reality check that was. I just learned that I can borrow from my pension account. The amount I am able to borrow is $2400. I will repay this amount directly from my pay check. My question is if it will be a good idea knowing that my pay will be less the monthly payment. I was going to use the money to pay some of the bills I have now.

Any comments/suggestions?

iVillage Member
Registered: 11-20-2005
Sat, 12-31-2005 - 1:34am
Speaking from personal experience on this, we found it to be a help in paying off the debt (the interest rate was SO much lower than the CC) but out payment per month was more than the min pmt on the CC. We did do it because even though it was a bit more, the CC's were paid off in 2 years, over and done. My advice is, if possible, when paying those debts off (if they're CC's) close them. If you pay them with the loan and re-charge, you're really not helping at all (we learned that the hard way..) so just be mindful that since you've paid them, it doesn't mean you should go charge them up again :0)
Image hosted by Photobucket.com
Photobucket
iVillage Member
Registered: 03-27-2003
Sat, 12-31-2005 - 7:49am

Personally, I wouldn't do it, especially if you're able to handle your cc payments at their current rates.

A couple reasons--first of all, many (actually, most) people who use a loan to pay off their ccs end up back in cc debt again very quickly, only worse this time because now they also owe on the loan from the previous cc debts. And, in this case, this is your retirement you're talking about--every penny you borrow out of there will stop earning interest for you toward your retirement. For me, one of the big debt-stoppers has been the realization that every time I debt, I'm borrowing against my future.

Second of all, as your debt goes down and your record clears up from faithful paying, you will start to get credit offers with great interest rates. So although the loan may have a lower interest rate right now, it won't be too long before you can match or beat that rate with a cc anyway.

Good luck with whatever you decide. Blessings,

Heather

Avatar for cl_phocid
iVillage Member
Registered: 03-26-2003
Sat, 12-31-2005 - 2:04pm

I agree with Heather - I am an example of someone who was *completely* dedicated to paying down debt, got a loan from my credit union, and then ran up my cards again.

All my best,
Danni