Okay, I’d like to solicit the opinion of my 25 faithful readers, my fellow Yakezie-an’s who were helpful enough to follow my post in the forum, and the twitter-ites who were intrigued enough by my tweet to follow the link. On Friday, I went down and signed the paperwork for a loan of $3,0723.03, the portion of my hospital bill that the insurance company didn’t pay when I had emergency surgery in October. I agreed to potentially pay as much as a third of the loan value in interest so the bill would not go to collections and put a major ding on my credit score. But my question is, was this the right decision?
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The bank that the hospital is partnered with charges an APR of 8.5%. The truth-in-lending disclosure statement reveals this comes out to a $1,014.58 finance charge if I make minimum payments throughout the life of the loan. Once I pay off the remainder of the anesthesia bill with the contributions, company match, and incentive bonus to the HSA (probably 2 more months), I will be able to contribute another $100 towards this.
That would bring it down to paying it off over 2 years (instead of 7) and costing only ~$250 in interest. But is saving a fall of, what, 10 points on my credit score worth $250 or more?
Pros of financing:
Credit score. Last year, it finally crept back into “fair” territory. By doing this, my score is not being hurt. It may drop a point or two as my credit utilization ratio increases. But that will recover, and having another account with no late payments will help my score in the long run.
Debt Collectors. I won’t have to deal with debt collection companies. I’ve gone down that road in the past, and they are a real pain, even if you get one that actually obeys the laws.
Cons of financing:
Interest. As I mentioned above, I’ll be paying somewhere between $250 and $1000 for the privilege of not letting my credit score take a nose dive. If I had made arrangements with a debt collector once the HSA money is available again, it would have been paid off around the same date, but saved me hundreds of dollars.
Lost savings. That $50 is the meager amount I’m able save each month right now. It was supposed to be applied to the fund I may need to pay bills later this year when the project I’m on completes and my employer has no guarantee of any more work within a commuting distance for me.
What would you have done in this situation? Take the loan, or make arrangements with a debt collector? Or a different plan altogether?
- How to Decimate Your Credit Score (money.usnews.com)
- How To Freeze Your Credit Report (moneyqanda.com)
- Things That You Didn’t Know About Your Credit Score (philammann.com)
- Tips for Improving Your Credit Score (ally.com)
- Bad Credit Loans A low credit… (theaaroncraig.com)