I can afford to save some money. However, I have a bank loan which I currently pay off at £161/month. Would I be better paying more on my loan to clear it more quickly, or putting some money in a savings account?
2007-03-26 08:20:12 · 12 answers · asked by Athene1710 4 in Business & Finance ➔ Personal Finance
Take what you can afford and divide it 25 / 75 . Put 75% of it towards that loan and get it paid off quickly.
Put the 25% in a savings so that too can grow slowly and be there in case an emergency arises in the near future.
When done with the loan, hit your savings hard and get it built up to at least 6 months worth of income. More would be better but many get discouraged by telling them that.
Once your savings(or can have a higher yield investment account of some sort if so desired) has at least 6 months to a years salary in it, let it set for emergency purposes and never touch it for anything else. Start investing with what you have coming in now or save up (and hopefully pay cash) for something needed in your life like a vehicle or home.
: )
2007-03-26 08:53:14 · answer #1 · answered by Kitty 6 · 0⤊ 1⤋
Pay the loan off first as you will definitely be paying higher interest on that than you will earn on your savings. Check with the loan provider first that there are no penalites for early redemption. If there are you will need to weigh this up. However you might want to save a little too, it's best to have enough cash to meet your commitments for at least a couple of months if, for example, you lost your job.
2007-03-26 11:04:41 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Financial website The Motley Fool usually recommends you should pay off all debts as quickly as possible (though should also have 3 - 6months expenses saved up in case of an emergency) before doing serious saving or investing, as the interest from debt (loans, credit cards, etc) will cost you more in the long run than what you're liable to earn by Saving & Investing.
2007-03-26 08:33:50 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Definitely pay off the loan first. All you have to do is compare the interest rate of the loan to the interest rate of the savings account and you'll logically see which is better to put your money towards.
2007-03-26 08:26:34 · answer #4 · answered by Truman 3 · 0⤊ 0⤋
The interest you pay on the loan will almost certainly be bigger than the interest you will receive from a savings a/c. Therefore you should pay off the loan first! Furthermore you will be free of the worry that every loan imposes on the borrower.
2007-03-26 08:33:51 · answer #5 · answered by Anonymous · 0⤊ 0⤋
Do you know what happens when people say that they'll start saving once they have paid off their debts? Five years down the line they are still in debt (usually even more in debt) and have no savings.
Set up a direct debit into a savings account for whatever you can afford. Even a small amount. Then, each year when you get a payrise increase your direct debit amount by around 20%-50% of your payrise. This way you will still feel the benefit of the pay rise plus your savings will increase.
Finally, do not ask for a cash card for 'easy' access to your savings cos do you know what happens? Two weeks into your pay month when you are skint and out (drunk) one Friday night you'll end up drawing your saving out!
Trust me - it happens to everyone.
2007-03-26 15:04:49 · answer #6 · answered by Dr Kildare 2 · 0⤊ 1⤋
Depends what interest you are paying on the loan/you would get from savings.
For a simple example, if you are paying 5% interest on your loan, but would only gain 3.5% on a savings account, then get rid of that loan!
2007-03-26 08:27:35 · answer #7 · answered by Anonymous · 1⤊ 0⤋
Pay your money off quicker, that way you'll be free of this loan and able to spend as much money as you like-what you earn that is lol!
(if you want to save up put like a £5 a week or somthing in a money box and put it in your savings acount when you get to a certain amount)
2007-03-26 08:25:40 · answer #8 · answered by Anonymous · 0⤊ 0⤋
I'd pay off the loan first, but only after making sure there was no "prepayment" penalty.
2007-03-26 08:47:59 · answer #9 · answered by Anonymous · 0⤊ 0⤋
pay as much off a month as you can afford
2007-03-27 12:10:47 · answer #10 · answered by Anonymous · 0⤊ 0⤋