Which is better? Take money from savings or borrow on HELOC?

amother

Wed, Jul 17 2019, 10:31 pm

Looking for advice from my money-savvy friends here on imamother....

We recently had some major expenses. A family simcha (as frugal as we could!), major car problems necessitating high priced work to do on it, and unusual medical expenses(which left us with bills over and above our gvt medical assistance)..
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We are relatively low income and live month to month.
We have savings of about $20,000 BH.
All these recent expenses added up to about $15,000. We put it all on the credit cards until they need to be paid off in a few weeks.

Dh thinks we should take the money out of our savings.
I am worried at the thought of using up our savings and think that we should put it on our Home equity line of credit. We have a credit line of $18,000 and are currently using only about $1000 of it (and we are paying off a good amount every month)

Comments, thoughts, suggestions and advice please?
Financially savvy amothers, what would you do?
TIA!

Amarante

Wed, Jul 17 2019, 11:10 pm

Borrowing the money costs you money in terms of interest plus it is a loan secured against your home which is not a good thing.

Your money in savings is not earning much so cost of borrowing is interest on loan minus whatever you are earning. I am assuming there is no deduction of interest or do you itemize.

F you are disciplined and pay back into savings as much as you would for the loan payments, I would take from savings since you have the line of credit to fall back on as you build back your savings. But this is a call you have to make as to how you would allocate your money. Would you be disciplined to save again? I tend to be conservative in terms of not wanting to increase amounts owed on a home.

amother

Wed, Jul 17 2019, 11:24 pm

Amarante wrote:

Thanks for responding, Amarante.

NO, we would not replace the savings. We really do not earn enough to put money aside. We dont even have money going into a pension plan at the moment Sad

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the idea of the HELOC is that we would pay it off $100/month indefinitely. And eventually when we sell the house or remortgage we would just suffer the loss.

rachelmom1

Thu, Jul 18 2019, 12:11 am

Can't vouch for the right or wrong here. It's HELOC for me. I'm not disciplined enough to return to savings. The incentive of interest payment encourages me to pay back the loan.

amother

Thu, Jul 18 2019, 9:13 am

rachelmom1 wrote:

Can't vouch for the right or wrong here. It's HELOC for me. I'm not disciplined enough to return to savings. The incentive of interest payment encourages me to pay back the loan.

Thanks for commenting, rachelmom1. I appreciate hearing everyone's perspectives.

Would love to hear from others too please!