Paying Down Debt is Saving

Saving More with Less Debt

Purchasing a home or investing in your home’s equity can be a smart money move. Even the right credit cards can boost your credit score and create a bright financial future. But paying 21% or more in interest charges on a loan while earning 4% on your savings equals some big losses. Bottom line, paying down debt adds up to impressive savings.

Do Some Quick Math

If you earn less on your savings than what you’re paying on a loan, consider shifting your priorities to paying off your debt.
For example*, let’s say you’re earning 2.50% Annual Percentage Yield (APY) on a $5,000 savings balance, but you have a $5,000 loan costing you 28.00% Annual Percentage Rate (APR). If you continue making the $155/month payments for five years, you’ll end up paying $4,340.75 in interest. At that same time, you’ll earn $665.01 on the savings. By removing that $155/month payment from your expenses and putting those dollars into savings, you’d have $1,800 in just one year.

As long as you have enough emergency savings, it could make smart financial sense to put your savings toward the loan and pay it off. Or hang onto your savings and work toward paying off high-interest loans and credit cards. Consider transferring the balance for high-interest loans that seem to grow faster than you can pay them. Clearwater Credit Union Visa credit cards could help you get caught up.

We’re here to help you focus more on your savings. Stop by any branch today to talk about the best savings accounts for you.

*Reminder that rates and terms are subject to change, remember to do your homework and contact your financial institution with questions.

All loans subject to approval. Rates are subject to change. Insured by NCUA.