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Is Skip-a-Pay Right for You?

Posted in Borrowing Money
November 1st 2016 by

Many credit unions, Aspire included, offer members the option to skip their loan payments certain months of the year. December and January are two months this service is typically offered.

As a one-time thing, it can be a great convenience. It’s when you do it multiple times that things can get a little muddled. While taking advantage of skip-a-pay offers may make things easier in the short-term, it’s not necessarily the right choice for long-term financial wellness.

Here’s what you need to think about before skipping.

You Could End Up Upside-down on Your Auto Loan

If you owe more than your car is worth, that makes you upside-down on the loan. Skipping multiple loan payments can put you in that position. If you decide to trade in your car before the loan is paid off, you could run into some issues.

Your Loan Term is Extended

The Skip-a-Pay option doesn’t cover the cost of the payment for you. It really just buys time. If you skip November and December, as well as the two summer months offered, that means you only paid down the loan 8 months out of the year and adds those months to your maturity date.

Protection Services May Expire

If you have Debt Protection, GAP, extended warranties, etc., they typically only last until the original loan maturity date. You might not be covered once that date passes.

What Are Good Alternatives?

If you need extra cash, you can try:

  • Holiday or Vacation Loans – These loans divide payments up over a year, so you won’t have any lingering debt.
  • FlexLine of Credit – This will allow you to access extra cash whenever you need it. You can attach it to your checking account as overdraft protection.
  • Credit Cards – Credit Unions offer low-rate cards that help you get through a financial rough patch.

As always, feel free to contact us for assistance if figuring out what’s best for you!

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