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Advice Needed Please


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#1 little leisa

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Posted 11 September 2004 - 08:02 PM

I recently got a job that pays $350 more a week than what I used to be on.

So instead of adding to my shoe collection each week, I've decided to be sensible with this extra cash.

I've been wondering whether I should do one of two things:

1). Pay off the remaining $4,000 on my credit card with $4,000 that I have saved already in my 1NG account - then begin a new $350 per week savings plan

2). Leave my $4,000 in my 1NG account (deposting $100 per week to continue with the savings) so that I can withdraw it if I need it for the wedding. Then pay off my credit card at $250 per week.

The latter would see me paying my credit card off in 5 months, then once that's done, topping the ING up with that $250 per week.

My concerns are:

The interest I will be charged on the credit card for the 5 months

or

The cash (and security) I will lose if I pay pay the credit card off using the only savings that I have.

I do have one other option, and that is to apply for a very low interest rate card that is out at the moment; and pay out the $4000 card owing so that I am charged a lot less interest.

But is this really the best way to do it?

I would greatly appreciate any ideas.

Oh yes. One other idea was to get a personal loan to pay out the credit card ... but this is just confusing me even more!

(PS: One thing that is really important to me right now is setting my finances up so that I may apply for a home loan in about 1 year. I should have $20,000 saved in just over 12 months but understand they prefer you don't have loans, or too many credit applications in your history).

#2 Mrs_Stevo

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Posted 11 September 2004 - 08:35 PM

I'm not a financial adviser but personally I'd pay out the credit card. The interest on those things is just way too much! I hate them & try to avoid using ours unless really necessary.

If you use your savings, you will still have your credit card to use if an emergency arises & don't forget the extra $350 per week which will add up very quickly.

The other option of taking out a personal loan will mean less interest, but you still will be paying interest. I'd prefer to get rid of the debt altogether, leaving no interest & then get saving!




#3 little leisa

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Posted 11 September 2004 - 09:34 PM

You've pushed me in the direction I was leaning...

Thank you very much Mrs Stevo. biggrin.gif

(yes, I HATE the interest on CC's too, they make me cranky)...

#4 Profile Removed

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Posted 12 September 2004 - 12:10 AM

I agree with Jeanette - I'd rid the interest payable accounts while you can. Good luck with your savings chickie; There'll be a HUGE sum in there before you know it! biggrin.gif

#5 little leisa

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Posted 12 September 2004 - 04:13 PM

Thank you chicka

I hope so too wub.gif

xxx/ooo

#6 Jen

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Posted 17 September 2004 - 02:58 PM

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#7 Starbuck

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Posted 17 September 2004 - 03:07 PM

I agree with the other girls - any interest you might be earning on your ING account won't be even close to the interest you're paying on your credit card - so get rid of it asap.

And believe me, the feeling of relief and freedom that comes from paying off your credit card outweighs any short-term concern about having less cash on hand! When H2B and I moved in together just over a year ago I owed $3000 on my credit card, I now have $7500 in the bank and no debt - life is a lot less complicated!

Well done on the new job by the way smile.gif

#8 Liz G

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Posted 17 September 2004 - 03:21 PM

Hey Leisa,

I'm a loans officer - so here goes advice re how it will affect your home loan.

When you apply for a home loan (or any loan for that matter) the financier has to access all credit cards as it there were fully drawn, whether or not they are.

So, my advice would be this: (and understand as well i hate credit cards, i have one i pay in full every month)

Firstly, the interest you are getting charged on your credit card is likely to be 14%+ per annum. The interest you are earning in your ING account is likely to be 6% or less (depending on which ING account you have). Even if your $$ are in the max interest ING account, you are paying 8% extra interest on your credit card ABOVE what you are earning in interest.

Secondly - If you've got the cash to pay off the credit card, that's a much better option than taking out a personal loan - for the simple reason that the personal loan interest rate will also be higher than the interest you are earning on your savings, plus there's the added danger that if you structure the loan over say a 4 year term, that if you don't pay any extra off, you end up paying more interest overall.

Thirdly, you said you were worried about losing the security of having the cash in the bank if you pay it off your credit card - but you'll be able to save $350 per fornight extra on top of what you are currently saving - which'll mean you replace the $4,000 in 12 weeks - so you'll have that cash again in less than 3 months - with no interest charges on your credit card. Plus, you have the back up of a credit card with nothing owing on it.

So, my advice:

1. Pay the credit card off - and reduce the limit on the card so that you don't end up finding that you owe $3 - $4000 after the wedding. This will also help to to increase the amount you can borrow when you apply fot a home loan.
2. Pay the balance owing on the card off each time it's due if possible - or pay as much possible off as you can - this will keep your liabilities/balance owing on your card down and minimise your interest charges.
3. Set up your savings plan for the $350 per fornight and stick to it - and any extra cash you have add to your savings account - the more you are saving the more you will want to save - and you'll find after 12 months you will have your $20,000 or more!!
4. Put your savings into a high interest earning account like a term deposit or cash management account - so that when you get paid your interest, it stays in the account - you will earn interest on your interest and make your money work for you instead of the other way round!

That's my advice, but please understand i come from a lending perspective, and i hate credit cards, so please only take from this post what you think will help you out.

Also, if you like, i have some general info re housing loans etc which i can post you in prep for next year - they are generic, i.e. not recommending any finaniciers, they just give an overview of the home loan process and what financiers like to see.

Good luck! And congrats on the new job!!

Liz
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3rd April 2004

Rylee Paul Gentry born 23rd January 2007!!

#9 kjpm

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Posted 17 September 2004 - 09:36 PM

I work in credit cards but totally agree with what Liz G has suggested. the only other thing I would try and do is payout your card but then put $250 a week into ING and $100 a week into your credit card. That way you will always be slightly ahead with that and won't risk the interest hiking up again. Once you find you're in enough credit on that, then put the extra into ING.

Make sense??

Definitely pay out the card as a first priority.
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