Whether you see the advertisements in your bank branch, on a billboard or on TV, there’s one thing that’s for sure, the banks want you to see them so you can skip a payment.
How nice of them… right?
As you might suspect, the banks aren’t letting you skip a payment because they’re trying to help you out.
Here’s what you need to know.
Skipping A Payment Helps The Banks… Not You!
When you skip a payment, it isn’t like the bank is going to make the payment for you.
Instead, you’ll just pay more in interest than you would have otherwise and the principal won’t decrease like usual for the month you skip.
If you’re skipping a payment on a loan such as a car loan, the bank will probably just tack another payment on to the end of your loan.
If your loan was supposed to be paid off in April of next year, it will now be paid off in May of next year, all while paying the interest on that extra payment you skipped.
If you’re skipping the payment on a revolving line of credit, such as a credit card, you’ll end up with a similar dilemma. Assuming you don’t make any extra payments to catch up for the one you skipped, your loan payoff date will be pushed out and you’ll end up paying more in interest.
However, depending on how high your interest rate is and how big your payments are, your pay off date could be pushed out more than one month by skipping just one payment.
You’re Digging Yourself Deeper In The Hole
Skipping payments appeals to people during the holidays because they likely feel like they need to buy a ton of gifts for their friends and family. That means any skipped payments probably aren’t going to end up in your retirement account.
Instead, the money will be spent on presents your friends and family won’t even remember next year. Honestly, do you remember what everyone got you for Christmas last year? Didn’t think so.
That money should be used to pay down your debt as planned and move you one month closer to freedom from the debt you’re paying off. However, when you spend the money on presents, you’ll continue to live above your means and continue the awful debt spiral.
You Should Be Planning To Get Out Of Debt
Instead of skipping a payment, you should be focused on how you can continue paying off your debt and affording the holidays at the same time.
If you’re super motivated, you may even be trying to figure out how you can make an extra payment on your debt during the holidays, just like every other month.
The key to remember when you see any advertisement is that someone else is trying to get you do to something that is in their best interest, not yours. The banks want you to skip payments so they’ll earn more interest on their loans, which is the way they make money.
Don’t fall for the trap. Do the smart thing and continue making your payments while not incurring any more debt during the holiday season.
If that doesn’t seem possible, you may need to reevaluate your holiday spending habits.
Have you ever used one of these skip a payment promotions? Would you if they were offered to you? If yes, how did you or how would you treat the money you didn’t spend on the skipped payment? Would you spend it or do something else with it?
Photo by: Vincent_AF Text added by: Lance Cothern