Should I Use Savings To Pay Off Credit Card Debt If Unemployed?

Should I Use Savings To Pay Off Credit Card Debt If Unemployed?

One constantly reminds his younger and older self to save money. It helps one counter emergency needs and ensures sufficient financial flexibility.  It is the reason most individuals start their emergency fund. It helps them clock savings by gaining interest over time.

However, individuals without one struggle to meet emergency cash requirements. They resort to their family and friends for help and tap minimal savings to pay bills or counter emergencies.

Is it the right way to deal with debt?

No. Using savings to counter debt is ideal when the debt is only 10% of the savings. Alternatively, if it consumes over 60% of your savings, it may hamper your financial well-being. You will hardly be able to save in that case. Moreover, savings are a must if you have big life goals like buying a car in finance, securing a child’s future or purchasing a property.

Thus, if you have accumulated credit card debt but are worried about being unemployed, seek other ways to pay it. You may wonder how the interest rates work as you make regular card payments. Additionally, how missing credit card payments may impact your credit and finances. However, unemployment makes it challenging to counter any credit card payments. The blog lists whether you should use savings to pay debt and other modes to pay credit card debts.

Should you use savings to pay off credit card debt?

If you want to use savings to pay your credit card debt, check how much money you hold there. Next, tally it with the credit card debt. If you have other monthly bills and payments, you would not like to deplete your entire savings. Moreover, if you are seeking to tap your emergency funds, stop. Using emergency funds to finance the credit card debt may not be ideal. Using it may reduce the overall amount that you may get.

Additionally, it may hamper your essential expenses. Usually, an emergency fund is a 6-month backup to counter phases like unemployment. Pay for survival needs like food, energy bills, and rent.

If your credit card debt is almost similar to emergency savings, avoid tapping it.

How do you pay credit card debts without using critical savings?

Sometimes, you do not have to deplete all your critical savings on a single debt. Instead, you can check other ways to deal with the debt. For example, negotiating the costs with the credit card providers. Even if one dealer agrees, you can reduce your liabilities. Similarly, you can deal with it the other ways also:

1) Check bad credit loans without a guarantor

Individuals facing severe unemployment blues suffer credit drop. Thus, it may be hard to qualify for quick cash for emergencies. However, some lenders provide loans for bad credit with no guarantor on benefits payments. It is helpful for unemployed individuals receiving government benefits for regular needs. You may get one by providing valid proof of payments without the need for a guarantor or a third person as a guarantee on the loan.

You can use the amount you get to settle the credit card debt payments. Usually, the amount is low and depends on your affordability. If you can manage the payments, you get the loan.

2)  Contact debt relief services

Debt relief services negotiate the deal on your behalf to reduce the interest, balance and other associated costs. Additionally, they help you settle payment plans that you can pay comfortably. It is within your budget hemisphere. However, the experts charge a fee for their services. Check and explore the best debt relief service providers and deal with legal ones.

3)  Consolidate credit card debts

It is one of the best ways to clear your credit card payments. However, qualifying for a debt consolidation loan as an unemployed may be challenging. It is because the absence of regular income makes the profile seem unreliable.

Lenders may demand a guarantor in this case. It will help the lender analyse both profiles and provide the best amount as a loan to the provider. Consolidating credit card debt reduces your debts significantly. However, you can optimise your credit score with a single monthly payment.

It is a debt, and you and the guarantor will be responsible for regular payments. The guarantor will pay until you get a suitable job opportunity.

Alternatively, use balance transfer cards if you lack a guarantor but have a part-time income. In this, you can transfer the credit card balance to an entirely new interest-free credit card. You can utilise the introductory period or the promotional period. Ensure that you plan your repayments, or you may pay a high-interest rate after the introductory period.

4)  Look for ways to reduce your bills

Don’t wait to dip your savings to pay the credit card bills. Check the monthly costs of your credit card debt and brainstorm ways to reduce it. Additionally, reduce other lifestyle aspects to cut costs. You can do so in the following ways:

  • Switch to affordable subscriptions and energy sources
  • Cut down or halt using the unnecessary subscription
  • Avoid using the savings for dining out
  • Halt insurance premiums for the unemployment phase
  • Switch to affordable rental space
  • Cancel services or monthly repairs that you can do yourself. For example- car washing and lawn watering.

5)  Identify the ways to earn more

Regardless of your efforts to manage the finances in unemployment, you may struggle with finances. It is because nothing can substitute regular employment. Thus, improve your qualifying prospects for the best career opportunities and jobs. Full-time employment can be challenging if you have been unemployed for a long time.

You can seek part-time job opportunities in a favourable niche and expertise. However, Catering expenses before the payment time may be challenging. You can meet your needs with 15-min loans hassle-free. Yes, you can get these quickly to your account with minimal repayment proof, like part-time income.

Bottom line

Thus, using savings to pay your credit card bills is not always ideal. It is especially not favourable in situations like unemployment. Instead, you can utilise any of the above methods to counter the bills. Explore the best suitable options according to your needs and affordability. Clear your credit card bills and reduce your liabilities. Moreover, it also helps you build a credit history.

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