Buying Out Old Contracts To Pay Less Overall
Financial Management

Buying Out Old Contracts To Pay Less Overall

Recently mortgage rates here have been dropping and as a result of the economy. One person mentioned that if he was with a plan under the current rates he would probably a couple of hundred a month interest rates. The catch? He is stuck with his old contract and to get out of it he has to pay about a $20,000 penalty. Still though, he says that in the end he would still save money.

Thinking about it though, $20,000 is a lot of money to spend at once to save money that will need to stretch a couple of years before you will see that savings return. Sure enough, he doesn’t actually have $20,000 to spend and as a result would have to borrow that from the bank too.

If the amount was a lot smaller I would say it would make sense to buyout your old contract if the savings are worthwhile under a more modern rate plan.
However, at $20,000 it’s almost attractive to just find away to invest that to make more money. Hence, the ultimate goal is still to put more money in your pocket.

Cell phones can be a good example. For many people that are stuck on a contract using a very high rate plan, if you discover one that is extremely lower and buying out the contract would still save you a lot of money, then in those cases the lump some sacrifice in the beginning makes sense.

For a range like $20,000 though, that makes it trickier. I guess it mainly depends on how much cash savings you have and your tolerance level in terms of the length of time that you would like to see a return by.

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