Sulian wrote to me through the GetOutOfDebt.org site and asked the following question. If you have a credit or debt question you’d like to ask just use the online form. I’m happy to help you totally for free.
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“Dear Steve,
I have this 19% personal loan with a payoff of $816.00 I’ve been paying for the last 4 1/2 years. I am so ready to pay it off I can feel it. I bring home about $1220 a month after taxes from work and about $2,200 in a savings account.
The minimum payment is $150.33 and they say I have six months left. Basically I would like to know the quick and best way to pay this off? How much of saving should go toward it?
How much of $2,200 saving should go toward paying of $816.00 at %19 debt? I bring home about $1220 after taxes.
Sulian”
The Answer:
Dear Sulian,
Go ahead and pay the loan off now using the money from your savings account. Then to replenish the savings account put the old monthly payment for the loan in your savings account each month.
The risk in doing this is that an unexpected financial emergency might come up in the next eight months you might be a bit short, but you’ll still have $1,400 in your savings account and building it back up each month.
If you are comfortable with that approach, do it. Experiencing the joy of eliminating a debt is a special thrill to savor. Enjoy the accomplishment.
