Pay Off Debts With Savings Article Discussion Area

Kevicho

OnePound wrote:

A point about property investment, following on from previous poster.

I have a BTL mortgage at a higher rate (5.5%) that my savings (about 4% in an ISA) so have considered making overpayments. However the interest on my mortgage can be offset against the rental income and therefore reduce my tax liability(Lower rate payer). I have not done any detailed calculations on this, but I''m thinking it makes sense to keep my savings??

In this case I think the only thing you need to worry about is your cashflow from the property, as long as the rental is greater than mortgage, then you should be fine, also have a word with your accountant for all the tax liabilities, id leave the savings were they are, if i were in your shoes, id let the rental pay the mortgage and use your own money to expand your portfolio or invest.

seven-day-weekend

When we had debts and savings, I was always the one who wanted to use the savings to pay off the debts (could have cleared them all other than the mortgage) but my husband never would, our savings were always his 'security blanket' (they still are).

Anyway, we're debt-free now so the problem has gone away!

waslostbutseenthelight

I didn't think I would be posting again so soon - but due to a period of illness my husband did not get his normal wage paid automatically into our 'bill' account today. As soon as I knew the money hadn't gone in, I transferred the same amount from our savings and although it woun't be in the account for a few days, it will be there in time to cover any direct debits/standing orders. So, I am totally glad that I had the savings to do this! Otherwise we could have incurred charges - our 'bill' account is close to the knuckle as all spare money is being used to pay off debts.

christill

Bringing a new issue into the thread. I have a student loan of around £9K. I have only been out of Uni a few years and am now earning £18K, and the Student Loan company have finally caught up with me so I am paying back £26 a month, which doesn't seem too much to me...

Anyway, I have just inherited £4k from my grandma, and I have about another £1K savings, all sitting in my current account.

I obviously realise that this is about the worst thing the money could be doing at the moment, but I am a bit of a financial novice and could do with some advice about what my next step should be. Before I start doing research into the loads of different savings options, would I be better off using it to pay off my student loans?

Surely I need to consider the fact that in a few years time I might want to be putting down a deposit on a house (when I stop renting) and a student loan will look pretty tiny in comparison to that kind of debt...

I really appreciate your advice.

Chris

stphnstevey

It depends on the interest rate you pay on your loan compared to the NET interest rate you could get by putting the money in a high interest account. Although this normally only works if you are actually able to put the full student loan into a high interest account (ie not actually spent it!)

christill

Well, it's a regular government student loan so (I assume!) it's low interest (does that mean it falls into one of Martin's paying off debt exceptions?). The money was all spent long ago, but I do now have some savings since I am no longer a student. Should I use my spare £5K to pay off approximately half of my loan or keep it somewhere to gather interest and possibly be used towards a mortgage deposit in a few years?

Jolinar

I think this is a good article aplicable to a lot of people, although for me on a DMP I'm not allowed credit cards or any kind of credit so savings are a must I'm afraid. Also round here if I asked a tradesperson to take a credit card they would look at me as though I'd sprouted a second head lol

Imelda

christill wrote:

Well, it's a regular government student loan so (I assume!) it's low interest (does that mean it falls into one of Martin's paying off debt exceptions?). The money was all spent long ago, but I do now have some savings since I am no longer a student. Should I use my spare £5K to pay off approximately half of my loan or keep it somewhere to gather interest and possibly be used towards a mortgage deposit in a few years?

Hi Christill,

You should definitely put this into savings, an ISA will be your best bet (no tax on the interest). In a cash mini ISA you can invest £3,000 per financial year. I don't know what your current account pays interest wise but they're generally not very good and you'll also be taxed at 22% on it!
In an ISA you'll get 4% interest at least (take a look at Martin's article on savings and investment, also see the forum page), your student loan will be accruing interest at about 3% (not sure what it is this year yet). You are only paying back £26 at the moment because the government takes 9% of your earnings over £15,000 per year (if you earn less than that you don't repay anything). Also, if you want to get a mortgage in the future, providers don't usually include your student loan along with other debts although some will take into account your payments in their afforability calculations.

nica882

Hi there can someone help im new to this,, my dad is terrible with money and asked me to look at his situation but its complexed so bascially anyone with the same promblems or with with some knowledge on this matter please help.


Right my dad was ill and had a heart attack, so since then hes not working and wont be fo good now ( looking that way) so has no income.
He has no mortage but pays bills, he has debt reaching 25k, but has savings of about the same or maybe 30 k.
He wont pay the debt of as hes worried he wont have no money for emergencys as he lives with his girlfriend and she owns the place. He is currently in a debt managment programm.
Can any 1 advic me what to get him to do wether to pay the debt of in whole, is that the best option???? Many thanks ad

nica882

Hi there can someone help im new to this,, my dad is terrible with money and asked me to look at his situation but its complexed so bascially anyone with the same promblems or with with some knowledge on this matter please help.


Right my dad was ill and had a heart attack, so since then hes not working and wont be fo good now ( looking that way) so has no income.
He has no mortage but pays bills, he has debt reaching 25k, but has savings of about the same or maybe 30 k.
He wont pay the debt of as hes worried he wont have no money for emergencys as he lives with his girlfriend and she owns the place. He is currently in a debt managment programm.
Can any 1 advic me what to get him to do wether to pay the debt of in whole, is that the best option???? Many thanks everyone ad