Pay Off Debts With Savings Article Discussion Area

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 people ad

littlelucy_3

I am a new poster but a long time lurker (and massive fan) of this site and the forums...so hi everyone!

I totally agree with the use of savings to pay off debts in almost all cases but wondered if you all agree with what I am doing with my own situation....

I am currently working for a year before (fingers crossed) going back into full time education for possibly 4 years (plan is to do an MA and PhD, both hopefully with funding). However, even if I am lucky enough to get funding, it is pitifully low and I am planning to save save save this year so I have a slush fund of about £12,000 to help me a bit over the four years I intend to study.

Meanwhile my boyfriend and I have a £208k interest only mortgage (we are 25 and living in London and it was the only way to get on the ladder!!). Am I mad to not be making overpayments on this rather than saving? I don't think so, as I think that having access to savings while studying (and effectively not earning so without easy access to good credit/further advances etc) is more important than paying off the mortgage right now. Our long term plan is to sell our flat and move out of London to a cheaper property and start properly paying off the capital at that point - maybe in 2 years time... Oh and PS: we are both debt free apart from the mortgage and our student loans.

What do you all think?

Thanks so much! xx

emmay_2

my query is, what should you do if you have a One Account, which i have whereby i have my savings sitting in my account reducing the amount of interest i am charged on my mortgage - am i still better off paying off my mortgage??

Thefunkygibbons

I agree with Martin fully

and like many on the MFW board, I treat the mortgage as another debt that should be cleared with savings as soon as possible

Daveabc123

Is it still better to pay off the debt with savings if you get tax relief on the interest? In my case I have recent mortgage debt but on a buy to let property, but I think I am correct in saying that the interest part of the loan repayment, say £4000 a year, is allowed (by the tax office) as costs - i.e. taken off the profit, (is that correct?) Therefore I am not sure but I think I may be gaining more by not having to pay tax on this than I would if I payed it off. Does that make sense or would it still be better for me to pay off the mortgage asap?

thanks

Dave

stphnstevey

If you pay off your BTL mortgage, you do incur less interest and hence less of your rental is allowed for tax relief. The Inland Revenue would see this as additional income (as your not using it to pay off a mortgage) and tax you on it at your highest rate.

freebie_fairy

I have student debts of £6,000 which I am paying off at £255 a month. I have enough savings to pay off £6,000 but I have no income and I am likely to have to move into private accommodation soon and rely on my savings to pay for rent, bills, food etc... until I get a job. Should I hold off paying my debt until I have secure employment? I have put £1000 in the loan account before but the bank still drip fed the money off the loan in the monthly payments. When I have a full time job should I just pay the bank the full £6,000 and clear it?

Karmacat

Freebie Fairy
I'm sorry I can't advise you about your questions - they're very detailed, and I'm pretty new. I just wanted to thank you for posting in this thread, tho it seems like it might not be the right place, as you haven't had any replies (you might want to repost on another thread, or make one of your own, this one seems a bit dead, I've seen that advice given quite a few times).

Anyway, your post bumped the thread right up to the top again - I'd been aware of it, but not paid full attention to it, and now, because of the whole concept of paying off debt with savings, I think I can see my way out of the hole I thought I was in.

tom188

freebie_fairy wrote:

I have student debts of £6,000 which I am paying off at £255 a month. I have enough savings to pay off £6,000 but I have no income and I am likely to have to move into private accommodation soon and rely on my savings to pay for rent, bills, food etc... until I get a job. Should I hold off paying my debt until I have secure employment? I have put £1000 in the loan account before but the bank still drip fed the money off the loan in the monthly payments. When I have a full time job should I just pay the bank the full £6,000 and clear it?

Is it student loan debt or credit card debt?

Student loan debt is the cheapest youll ever get. I save into an ISA and earn more interest on the money than the student loan is charging me. That way if I ever need a cheap loan its there for me and otherwise im making a profit.

Some people do like to be rid of it though.

GettingThingsDone

Interesting... I have £9K in an unit-linked 'endowment' with about 12 years to run. We are looking to move shortly and we have enough equity to pay off the loan and have enough for a decent deposit on the new place.

Our new mortgage will be a repayment one and the endowment is currently projected only to reach around £30K. This is the tricky bit - is it better to take the £9K now and pay off high-interest credit card debt, breathe a sigh of relief and then put the money that would have gone to the credit cards into savings?

From what I have read, this would be the sensible thing to do - just wondering if I'm missing something?