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5 Bumps

Tax return money plans... should i

Should I put the return money in a CD to borrow against and pay back over time as opposed to spending then saving up?

Here's my thinking: if I set aside $3500 in a cd, I've got $3000 or so I can borrow against. I could afford my surgery 6mo sooner if I use our return money. So, I get the surgery with the loan, and we pay it off over the next 6 mos. So then, I have $3000 to borrow again to get a flatbed for our pickup in 6mos after the loan for my surgery is repaid, instead of waiting a year to save up.

These small loans can also help rebuild the terrible credit I gave myself, as well as start in on my husband's medical bills as well.

Ideas? Thoughts? Is this a good plan?

Answer Question

Asked by matobe at 3:39 PM on Mar. 31, 2011 in Money & Work

Level 21 (10,174 Credits)
Answers (5)
  • To me the question seems kinda confusing. But if you have the cash to pay for something I think you should pay for it. You can always ask for a cash discount- and sometimes that will save you more money then having some money sit in a CD earning you 1 or 2% interest.

    As for as the credit score goes- I think you should just leave it. Credit scores heal with time, and by paying bills on time. IMO adding more debt to the mix isn't going to help- remember it's what got you into the mess (mess with the credit score) in the first place.

    In the words of Dave Ramsey, "If you play with snakes you get bitten."

    Answer by Erica_Smerica at 7:56 PM on Mar. 31, 2011

  • What she ^^ said. If you have the cash to pay for something, why would you get a loan? Doesn't make sense.

    Answer by SherriPie at 7:59 AM on Apr. 1, 2011

  • I don't understand why you would borrow money if you already have it. And, honestly, you make pennies in a CD since the rates are so low. What you'd pay in interest on the loan would far outweigh what you'd make in interest on a CD. Total no-brainer ... pay in cash.

    Answer by Anonymous at 9:15 AM on Apr. 1, 2011

  • CDs aren't built to borrow against.

    Answer by mama2three717 at 5:19 PM on Apr. 3, 2011

  • Cds are a secured amount of money. Basically, if I spend the cash, and pay off my credit, I no longer have that money available. It's gone. But if I put it in the cd, use it as security for a loan, then not only am i able to pay off my debt, but I am able to start building a good credit history. I have talked with the banker, and she and her superior loan officer agree this is a good idea. Whatever interest rate I get the loan at, I can subtract the interest I'm earning on the cd and actually pay a lower rate.

    Comment by matobe (original poster) at 8:56 PM on Apr. 3, 2011

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