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Hi ASolow,

Here's another way to consider your debt. You're currently paying a very low rate of 1.99% APR to borrow $1000. If you had your $1000 of savings in a totally free Internet saving account such as at 5.05% APR interest you'd actually be earning an interest spread of 3.06% APR. This is one way banks make money by borrowing money at a lower rate and lending it back out at a higher rate. Of course, a bank will do this on a much larger level where a couple % points can make a larger difference.

Here's the math on your current situation:

$1000 at 1.99% APR = $19.90 per year in interest

$1000 at 5.05% APR = $50.50 per year in interest

You can see that in this scenario, you're actually making $30.60 per year.

Now that doesn't seem like a large enough gain to jump for joy, however, it's a good exercise to help you weigh your options.

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