I have to pay $5k in medical bills.
My savings account right now is about $4k.
The medical bill I have has a payment option where you can, essentially, pay anything you want per month as long as you make a payment.
I am wondering how you decide if you would just pay it off and deplete savings, or just pay towards it monthly.
I’ve been doing OT right now so I don’t think I would have to pay on it for long if I put all my OT money towards it, but I can’t decide what would be best!
As far as I know there is no interest on it.
How to know when to save vs pay?
byu/Heaven-Breed-Me inpersonalfinance
Posted by Heaven-Breed-Me
10 Comments
You want to remain on good terms with your medical providers because if you jerk them around they will no longer see you.
So just dump all the overtime at the medical bills. Then start building the emergency fund.,
Are they charging you interest on the unpaid balance?
Verify no interest and see if there is a term where the pay as you can expires. If no interest and that period doesn’t expire I would definitely suggest making very minimal payments while you build more savings
I had a large medical bill a few times. They allowed payment plan. I checked and double checked thst the plan didnt tack on extra fees. Like I started the 1st month and watched it for a few months to make sure it wasn’t extra interest or admin fees charged. It went fine. I spread out the payments over a year. Helped my budget and emergency savings stay up instead of depletion to 0 so…
Pay debt if the interest rate is high. % number varies per person and finances. For example if I only had $3k to my name with a 3k 5% interest debt, I would make the minimum payments so I don’t screw myself over and have no liquidity if something pops up. Debt is a loan. Treat it like one. Interest bad, pay down if able to
If there is no interest, keep paying a fixed amount per month (so you know how much is going each month), and build your emergency reserve. Do set a limit for yourself to pay this medical debt in a year or so and don’t drag it out further. You never know when need for more medical expense will arise.
If no interest, I’d say just pay the minimum required each month.
There is always inflation, so if there is no interest charge on your unpaid balance, your monthly payments are getting smaller and smaller in terms of real value as is the unpaid balance just because your savings are growing with interest and the debt isn’t.
I have a car loan at zero interest and I’m in no hurry to pay it off because it is “free money”.
If it’s bugging you to have this balance, ask them for a settlement offer. They may give you a one-time lower price and you can either pay it or continue with payments. I negotiated 80% off once.
If you can pay as you go with no penalty I’d make a minimum payment and hang on to savings. If it was high interest debt that was growing rapidly due to interest, I’d prioritize paying that down.