Financial Planning for Generation X & Y Women
 
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Expert Q&A Archive

01/05/2010
Is skip-a-loan payment option a good idea?
I belong to a credit union, and they are offering skip-a- loan payment this season. Is there any downside to that? Is there an advantage to it?
Rebecca Schreiber CFP:
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The only time you should skip a loan payment with the blessing of your lender is if you have absolutely no savings. Keep the payment you would have made in a savings or money market account. If anything happens, you'll have a one-month buffer to keep current on your loan.
Blake Allison:
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The real advantage of skipping a loan payment is for the credit union, not you. While it is enticing to think that you get a 'free' month, the reality is that you have to pay the money back at some point. So what this means is that you extend the life of your loan and wind up paying more in interest. The downside is that many people will consider the money in their checking account (that should have been used for the loan payment) as 'found money' and will head out to the stores and spend it. So in the short-term, it might 'feel' good not to have to make the payment and have 'extra' cash for the holidays, but remember, from the perspective of building wealth, skipping a payment is not a good idea.
Kris Freeberg:
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The downside of skipping a loan payment during the holidays is that more interest expense accrues on the balance of the loan.
Gerri Detweiler:
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With skip payment options, you don't pay down your balance and continue to accrue interest. While it is convenient, the downside is that you won't make a dent in your debt.
H. David Whalen:
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I don't know enough regarding your finances to suggest a "skip-a-loan" payment. However, the faster you make the payments, the faster you can become free of the obligation. If you skip a payment, you still pay interest, I am assuming, and are extending your length of time [on repaying the loan].
Bettye J. Banks:
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Skipping a payment definitely has a downside. It is called INTEREST! Even when the lender gives you permission to skip a payment, interest accrues and the balance on the account goes up! Think again! Advantage? Well, maybe a little extra cash in hand for Christmas, Ask yourself, "Is your life going to be better or worse if you skip a payment?"