Savings VS Debt.

nilsac

hi all,

Need some advice and who better to ask.

Got 2 loans adding up to £12000 roughly. The loans have 3 & 4 years left to run. With repayments of £244 and £144 a month. I`m looking to put away atleast £600 a month into savings. My dilema is do i put this extra money into repaying my debts faster or continue to put this money away for a deposit on a house. Resulting in lowering my overall mortgage or pay off debts resulting in a smaller deposit but leaving more money to cover repayments.

minniepoos_2

Hi Nilsac,

I'm not claiming to be an expert in things like this, but my policy is to always to what Martin says (:)), and he mentions it here

I suppose once your debt is cleared it'll be easier and quicker to save.

But at the end of the day it's up to you.

You could always plot your loans into the snowball calculator then it'll be easy to see how much quicker your debt would be gone with the extra payments, then you'll know whether it's worth doing it or not.

Hope this has helped. Good luck

Firewalker

Hi Nilsac,

if I were in your shoes I would certaily pay the debt first. It makes sense - if you put all in your debt now, you will pay it faster and will save interest. After that you could focus on saving, paying off mortgages (these are normally lower interest than loans) etc. Have to admit though that I am building a small buffer for emergencies.

Firewalker

DVardysShadow

Firewalker wrote: »

Hi Nilsac,

if I were in your shoes I would certaily pay the debt first. It makes sense - if you put all in your debt now, you will pay it faster and will save interest. After that you could focus on saving, paying off mortgages (these are normally lower interest than loans) etc. Have to admit though that I am building a small buffer for emergencies.

Firewalker

It does make sense to have a small buffer, particularly if you have loans rather than cards. The other thing is, if you have an overdraft, get yourself out of that and practice living in the black.

Cloudy456

I can see both arguments - financially it makes more sense to pay off debts asap as you will be paying more interest than you will be earning on savings of the same amount. However, psychologically I can see the value of saving and keeping hold of a bit of a cash towards future goals - its not like you want to spend that money, you are talking about putting it away for the future. How about a bit of both - pay £400 extra to debts and put £200 into savings so you can see that account starting to grow then when you have paid off the debts nice and early you can add to it with a vengeance! Good luck whatever you decide.

Lottebear

We are in this situation, we have saved 50% which as been useful, when the car has had trouble and died and then paid 50% off the loan as overpayment by overpaying we have taken a 18 months off our loan so worth doing.