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— Slide 7: Using Discretionary Income to Pay BLOC —

Discretionary Income vs. Emergency Funds

You May be Thinking

what's the difference between paying down the BLOC with your discretionary income or just sending in additional amounts to pay down the PLUS loan* or any other debt?

*You can prepay PLUS loans at any time without penalty.

Let's explain it this way:

Do you set aside extra funds for emergency or other family need?

Many families will maintain some money in their savings account for emergency or other event (i.e., vacation expense). The money sits in their checking or money market account earning little or no interest.

Some families my use some of that money to pay down a debt, but not all of it. They want to leave a fixed amount in the account for an emergency or other need.
With the BLOC, your equity line is your emergency fund

In other words, by using all of your excess income to reduce the BLOC balance, your money is working constantly to pay down your BLOC balance to reduce interest charges.

You don't need to set aside emergency funds with the BLOC your entire credit line is your emergency slush fund (i.e., your bank).

So all your money is working for you. And whenever you need extra cash, you simply advance yourself money using your BLOC.
So What's the Difference?

the difference from using your BLOC versus prepaying a PLUS loan - in this example - is that the BLOC is working every minute of every day. Every dollar of your excess funds are in the BLOC account reducing the average daily balance, thus lowering your cost of borrowing.

No need to send in prepayments. The BLOC will work faster in reducing your account balance.

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