• 3 minutes Nucelar Deal Is Dead? Iran Distances Itself Further From ND, Alarming Russia And France
  • 5 minutes Don Jr. Tweets name Ukraine Whistleblower, Eric Ciaramella. Worked for CIA during Obama Administration, Hold over to Trump National Security Counsel under Gen McCallister, more . . . .
  • 9 minutes Shale pioneer Chesepeak will file bankruptcy soon. FINALLY ! The consolidation begins
  • 12 minutes China's Blueprint For Global Power
  • 7 hours Science: Only correct if it fits the popular narrative
  • 3 hours Crazy Stories From Round The World
  • 2 hours What are the odds of 4 U.S. politicians all having children working for Ukraine Gas Companies?
  • 24 hours EU has already lost the Trump vs. EU Trade War
  • 17 hours China's Renewables Boom Hits the Wall
  • 8 hours Do The World's Energy Policies Make Sense?
  • 2 days ''Err ... but Trump ...?'' *sniff
  • 18 hours Forget out-of-date 'dirty oil' smear, Alberta moving to be world's cleanest oil industry
  • 11 hours Impeachment Nonsense
  • 2 days Pioneer's Sheffield in Doghouse. Oil upset his bragging about Shale hurt prices. Now on campaign to lower expectations, prop up price.
  • 2 days Tesla Launches Faster Third Generation Supercharger
  • 23 hours Water, Trump, and Israel’s National Security
  • 2 days Passerby doused with flammable liquid and set on fire by peaceful protesters
  • 1 hour Who writes this stuff? "Crude Prices Swing Between Gains, Losses"

Breaking News:

Russia Plans To Boost Crude Oil Exports

Alt Text

Did Venezuela Just Default?

S&P Global Ratings declared Venezuela…

Alt Text

Goldman: Automated Trucks To Cost 300k Jobs Per Year

The race for automated trucking…

Gail Tverberg

Gail Tverberg

Gail Tverberg is a writer and speaker about energy issues. She is especially known for her work with financial issues associated with peak oil. Prior…

More Info

Premium Content

Is Now a Good Time to Pay Down Your Debts?

The question of whether a person should pay down debts comes up often, when there are forecasts that suggest unemployment rates and consequently debt defaults will rise dramatically in future years. I know some people say, definitely, “Yes”. I would say, “It depends.”

Clearly, at this point, interest rates you can get in a bank are low, and the long term value of most stocks and bonds is very iffy. So from that point of view, if you have assets that aren’t going to earn much in the future, and a smaller amount of debt, you may want to offset the assets against the debt. But not everyone is in that position. And not all debts are not equally important to pay back.

Student loans

Interest rates are generally pretty low, and lenders don’t have much they can take back in the case of default, especially if the reason you cannot pay is because you are unemployed. So I don’t see a point to specially paying them back.

Credit cards and other unsecured debt

The issue with credit card debt is generally the high interest charges that the banks charge you now. Because of this, running up credit card debt is not a good idea, and paying down debt does make sense, regardless of what happens in the future. But if you lose your job and don’t have a way of paying the funds back in the future, there is not much the unsecured lenders can do. So from that point of view, it doesn’t seem like a person has a lot to worry about, if he or she has credit card debt, and should become unable to pay the debt in the future.

Auto loans

With auto loans, if you should lose your job, and not be able to repay the loan, the car might be repossessed. If you are thinking ahead, buying a less expensive car might be an option, so as to reduce the need for a loan, and thus reduce the likelihood of repossession. Defaulting on lease payments would also likely result in repossession. If you want to be sure to continue to have a vehicle, and think layoffs or reduced income (if you sell services, and can sell fewer of them) would be a problem, trading in for a smaller, older, more fuel efficient car might be an option. If you need a truck for your business, and fear reduced business ahead, paying down the truck loan, so as to be sure it is not a problem in the future, might be an option. But if you have a second personal vehicle that you really don’t need and can’t afford (and haven’t paid much on now), I don’t think I would go out of my way to pay down the loan.

Home mortgages

Here, it is not as clear to me what a person should do. If you are close to paying off your loan, and have amounts in your bank account that are earning little interest, it is clearly a wise thing to do. But if you are a long way from paying down your loan, or the loan is for more than the value of the house (or both), I wouldn’t go out of my way to pay down the loan. I don’t see lenders as being to put everyone out on the street. Of course, if you are the first one to default, you may end up out on the street. And this is not what you want either.

One thing you may want to consider in paying down housing debt is where you really want to be located. If you are located in a desert area, where water is likely to be a problem in not very long, you may very well want to move. Now would be a good time to do it–or at least not pay down debt on your existing home. Similarly, if you want to move to be near children, perhaps to be in an in-law suite with one of them.

Debt to pay for new tools, gardening equipment, land for crops, water capture, etc

This may make sense in some cases, especially if you have the time and ability to follow through with your plans. But remember, others will likely not have what you have, and there is likely to be a problem with theft in the future.

Exactly how much debt pay-down or additional debt to do is a difficult question to answer, because we don’t know what our own personal circumstances will be, and we don’t know how conditions around us will be. But we need to make decisions based on the limited information we have to work with now.

By. Gail Tverberg

Gail Tverberg is a writer and speaker about energy issues. She is especially known for her work with financial issues associated with peak oil. Prior to getting involved with energy issues, Ms. Tverberg worked as an actuarial consultant. This work involved performing insurance-related analyses and forecasts. Her personal blog is ourfiniteworld.com. She is also an editor of The Oil Drum.




Download The Free Oilprice App Today

Back to homepage



Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play