How to pay off line of credit

[babygrant]

DH and I have ONE bank account which is attached to our line of credit. We have about $6,000.00 on that line of credit. Our paychecks go into that account and all of our bills are paid out of that account. I hate it. Hate it hate it hate it. It never seems like we get anything paid off in it.

I'm wondering if our best plan of attack would be to get our paychecks going into a seperate section of our bank account and then pretend like our line of credit is a loan and make payments on it from the seperate bank account. Does that make any sense??

We don't have any credit cards, just the $10,000 line of credit that we owe $6,000 on. Zero savings. We do have a morgage. No student loans.

[just_lily]

If that would work for you psycologically, do it! Some banks set up LOCs as seperate accounts, and others do it as giant overdrafts. I know lots of people that don't like the giant overdraft because it is easy to overspend and you feel like you never get anywhere in paying it down.

Before you switch all of your payments, I would call the bank, explain what you want to do, and see if they can open a new account for you and switch the LOC to it instead. That would save you the hassle of changing your payroll information and any other automatic payments you have set up.

And then just make sure you are making your minumum monthly payments on the LOC.

[babygrant]

Originally Posted by just_lily

If that would work for you psycologically, do it! Some banks set up LOCs as seperate accounts, and others do it as giant overdrafts. I know lots of people that don't like the giant overdraft because it is easy to overspend and you feel like you never get anywhere in paying it down.

Before you switch all of your payments, I would call the bank, explain what you want to do, and see if they can open a new account for you and switch the LOC to it instead. That would save you the hassle of changing your payroll information and any other automatic payments you have set up.

And then just make sure you are making your minumum monthly payments on the LOC.

Yes, ours is like a big giant overdraft and it's WAY too easy to overspend. At least if we have a sepearte account we can look and say ok we have XYZ we can spend on groceries this week instead of looking at the bank account and seeing that we still have $4000.00 available in our overdraft.

Will call the bank tommorow.

[choli]

Originally Posted by babygrant

DH and I have ONE bank account which is attached to our line of credit. We have about $6,000.00 on that line of credit. Our paychecks go into that account and all of our bills are paid out of that account. I hate it. Hate it hate it hate it. It never seems like we get anything paid off in it.

I'm wondering if our best plan of attack would be to get our paychecks going into a seperate section of our bank account and then pretend like our line of credit is a loan and make payments on it from the seperate bank account. Does that make any sense??

We don't have any credit cards, just the $10,000 line of credit that we owe $6,000 on. Zero savings. We do have a morgage. No student loans.

Your line of credit IS a loan, and yes you should be making payments on it regularly. Pay as much as you can off it monthly - at the very least, double the minimum payment. Paying from a seperate account will probably help you to see that it is being paid off.

[babygrant]

Originally Posted by choli

Your line of credit IS a loan, and yes you should be making payments on it regularly. Pay as much as you can off it monthly - at the very least, double the minimum payment. Paying from a seperate account will probably help you to see that it is being paid off.

I realize that it's a loan. All of DH's paychecks go on it, but since it's on our regular account all of our bills also get paid from it.

[Poddi]

I'd definitely open another account or two. I can't imagine doing everything with just one bank account. We have about a dozen different accounts with several banks. Some are for paying bills (paycheques go into those), some are for savings, one for just mortgage and property tax, one emergency fund, various investment ones. We do all the transfers online and never had trouble keeping track of all of them. You can easily find some no-fee or low-fee accounts nowadays.

[GuildJenn]

I think the first thing really is a budget and serious tracking of spending (like every dime, for a month or three). Is the amount you owe on the LOC edging upwards or staying the same? I'd want to know that and see where any overspending is happening. The core issue is the spending, if you think about it.

And then yes I'd try to move the LOC away from the cash so that you can pay it down for real. I wouldn't personally have too many bank accounts - we have chequing and short-term savings besides our LOC; long-term savings are held in our investment accounts - just because of fees, tracking, etc. I agree it's discouraging to see continual negatives and a bit tricksy of banks to display your "amount left".