Since essentially this new option increases your cash flow but the tradeoff is more money on the interest (longer term). If you do not have any sort of "emergency savings" already then if it were me I would take the new option and extend the term for peace of mind and safety. If you hit your savings goal mid-term, you can then take your "excess" cash and increase your payments to take care of the loan faster.
@TRR814 wrote:Hello,
I have a personal loan offer that If I took, would lower my monthly payments due by $500 which is great. It would allow me to get rid of my other personal loan and all other credit cards. I've already gone about a year without using CC's so I trust my discipline in not fallling back into that trap. It would also allow me to put away a few grand for emergency. From a strictly budget and peace of mind perspective, it seems good. The overall cost of the debts are pretty close...the personal loan I currently have has a little bit lower interest rate while the CCs are higher, so they essentially wash out...its not saving me a ton of money overall.
However, the personal loan would also be extending the term I have to be free of my other debts if I just paid them as I have been . Just doing the loan payment would take about 1.5 years longer than my current situation. The DTI would be about the same..I'd love to refinance my mortgage or move, if and when rates come down enough. That could be a while, so the drawback I see is basically having a high DTI for a bit longer than now but with less peace of mind. Plus I could always pay a bit more on the loan each month or take a percentage of those monthly savings and put away until I have enough to pay the loan in full.
Any thoughts or advice? Is it worth it to sacrifice another 1-2 years of high DTI for a little more flexibility with monthly payments now as well as a bit of contingency fund?
In my opinion no. To me it's taking some temporary debt and making it more permanent. If it were saving you a huge amount of money, then maybe; but in your case I would just keep whittling away at the account balances, as you have been doing successfully.
@FicoMike0 wrote:If your present loan is a lower rate, why not keep it and take out the new loan for enough to pay off the high rate accounts? Id look to minimize total cost. The term should work itself out.
+1
Why it has to be all or none?!
Use the new loan to pay high interest CC balance!
Objective should be to pay as little interest as possible.
