Paying down debt is 'better value than saving'

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Paying down debt is 'better value than saving'

Tue 31st Jan 2012

Individuals who are struggling to make ends meet each month and who have debts but also savings have been advised that paying off their borrowings should be their top priority.

According to Paula John, editor-in-chief at Your Mortgage, with the ongoing low-interest environment that has been the norm for the last few years, many people have been overpaying on their mortgages, but it often makes more financial sense to pay off things like credit cards and overdrafts as these products will have higher rates of interest.

Furthermore, some have been building up a nest egg, but this is not really the best investment option at present.

She argued: "It doesn't actually make sense and doesn't add up for you to be putting money into a savings account and not using it to pay down debt instead. It is simply a more cost-effective thing to do."

Ms John's comments follow those of Phil Perry, director at Ark Financial Planning, who recently claimed that it makes clear financial sense for individuals to determine which of their debts are costing them the most money each month and then for them to focus on paying these off as a top priority.

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