Spring is here, and people are buzzing with ideas on what they should do with their tax refund. You can treat yourself to something nice after a difficult year, or you can use the money to pay off a chunk of credit card debt. You may even consider saving it for a rainy day! But, is it wiser to spend or save?
Putting a dent in your debt repayments may seem like a good idea, but not at the expense of cutting back on groceries or being late on rent. Getting ahead is enticing, but when you’re in a vulnerable situation with your finances, it may not be the best plan. Below we answer whether you should pay off debt with your tax refund.
Maintain Your Livelihood
Paying off debt is a great financial goal for the long-term. So when you have the opportunity to knock out a large portion of what you owe, it may seem like a no-brainer. However, if putting additional income towards debt impacts your basic needs, it’s not worth it. Maintaining your livelihood is the most important goal while paying off credit card debt. It’s possible to live comfortably AND pay off debt at the same time, so don’t fall into the mindset that you must put all of your eggs in one basket.
Create an Emergency Fund
You don’t have to use your tax refund for just one cause. Consider splitting the money or putting it all into a savings account rather than using it wholly for debt repayment. Despite being able to pay off what you owe sooner, you may leave yourself vulnerable to financial strain without a savings cushion to fall back on. Give yourself the opportunity to save money now so you can be prepared for the future! It is comforting to know that you have resources in the event of an emergency.
Consider a Loan to Consolidate Debt
Weighing the options to pay off debt sooner or save money may be difficult, but with a debt consolidation loan, you can do both! The terms on a consolidation loan are chosen by you – so you can pay off debt no matter your monthly income. With one monthly payment, you’ll find that managing debt is easier and has lower interest rates than credit cards – meaning you’ll save money over time. Keep your tax refund for a rainy day!
Let the specialists at Lendah find a customized consolidation loan option for you. It only takes one application to find your best options.
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If you have questions about debt consolidation loans, speak to our team of knowledgeable professionals. Our compassionate loan matchmakers will find the best terms tailored to your unique situation with fast approval and rates starting as low as 3.84% for amounts up to $100,000.
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