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Hello,
Dilemma in short, My wife and I have 25k in debt ((on a 200k line of credit, guaranteed about 2 or so points over prime forever) at about 7% interest. We also have about 40k in savings at 5% interst max.. We are both used to having a 3-6 month cushion in the bank. We pay the loan down as much as we can each month but It still seems we’re paying a elluva lot of interest
My rational side say’s pay the loan off all or in part with savings (?); use aour monthly payment allotment to build up our savings again and, in a real pinch, hit up the line of credit line. My wife is very leery of having our nominal savings depleted. (Until 3 year neither of us have had a line of credit). But the most rudimentary math says we’d be way ahead by paying it off. (Aprox. Math says were losing 2 %)
Other extraneous details, pertinent or not; our line of credit has no collateral backing it. Our So. Cal. house and 3 cars are completely paid for. I have about 7 k in the stock market. We have an impeccable credit rating. We also have no revolving credit card balance.
We’re both in our mid 40’s with a healthy 3 yr. old .I’m self employed (boom and bust). My wife works part time at my families’ biz. -And last but not least, grandma has established a college fund for our son.
We live a modest lifestyle but are comfortable. I have high hopes for the future of my biz, but who knows. My wife has very marketable skills.
So the questions are:
1) Is there any reason at all for not to pay of our debt with are savings (given our healthy line of credit at it’s reasonable rate for that rainy day (?))
2) If we were to pay the whole loan of, would we essentially close our credit line?
3) Any merit to paying most of it off while keeping a modest balance?
4) Should the for mentioned be the right strategy, should we pay of al the debt, then borrow once a month and pay it of in full every month?
5) Are there some tax disincentives for doing any of this?
6) Are we likely to get hit with some early payment fee (anything standard)
For me I just hate having the debt hanging over us like a cloud, effectively loosing money every month (gain 5% on savings and pay 7% on the loan), just for the piece of mind of having savings, who needs it if you have a good credit line? (we dip into it for a month once in awhile)
All knowledgable advice is appreciated!! I must be missing something.
Thanks in advance,
Croak
Dilemma in short, My wife and I have 25k in debt ((on a 200k line of credit, guaranteed about 2 or so points over prime forever) at about 7% interest. We also have about 40k in savings at 5% interst max.. We are both used to having a 3-6 month cushion in the bank. We pay the loan down as much as we can each month but It still seems we’re paying a elluva lot of interest
My rational side say’s pay the loan off all or in part with savings (?); use aour monthly payment allotment to build up our savings again and, in a real pinch, hit up the line of credit line. My wife is very leery of having our nominal savings depleted. (Until 3 year neither of us have had a line of credit). But the most rudimentary math says we’d be way ahead by paying it off. (Aprox. Math says were losing 2 %)
Other extraneous details, pertinent or not; our line of credit has no collateral backing it. Our So. Cal. house and 3 cars are completely paid for. I have about 7 k in the stock market. We have an impeccable credit rating. We also have no revolving credit card balance.
We’re both in our mid 40’s with a healthy 3 yr. old .I’m self employed (boom and bust). My wife works part time at my families’ biz. -And last but not least, grandma has established a college fund for our son.
We live a modest lifestyle but are comfortable. I have high hopes for the future of my biz, but who knows. My wife has very marketable skills.
So the questions are:
1) Is there any reason at all for not to pay of our debt with are savings (given our healthy line of credit at it’s reasonable rate for that rainy day (?))
2) If we were to pay the whole loan of, would we essentially close our credit line?
3) Any merit to paying most of it off while keeping a modest balance?
4) Should the for mentioned be the right strategy, should we pay of al the debt, then borrow once a month and pay it of in full every month?
5) Are there some tax disincentives for doing any of this?
6) Are we likely to get hit with some early payment fee (anything standard)
For me I just hate having the debt hanging over us like a cloud, effectively loosing money every month (gain 5% on savings and pay 7% on the loan), just for the piece of mind of having savings, who needs it if you have a good credit line? (we dip into it for a month once in awhile)
All knowledgable advice is appreciated!! I must be missing something.
Thanks in advance,
Croak
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