December 20, 2021

Is It Better to Pay Off Debt or Save Money?

Achieve your financial goals by putting your income towards your debt-free future.

The benefits of paying off debt

By paying off debt as quickly as possible, you can reduce the amount of interest that is owed on your debt. Other positives of living debt-free are an improved credit score, building savings, and improved peace of mind.

The benefits of savings

By having savings available, you can pay off debt and prevent it from accumulating. Unlike debt, the longer you save, the more compounding interest will benefit you. The ability to build savings allows you to achieve goals such as buying a home and retirement.

Can I pay for housing with debt?

Worried about debt preventing you from getting a mortgage? Since debt is a common problem for many people, mortgages and loans are still offered to those who are paying down debt. Lenders will check your debt-to-income ratio to determine your eligibility. As long as you are proactively managing your debt and have an income to support your expenses, it is likely that you will receive a loan.

Why not both?

With planning and controlled spending, it is possible to pay off debt while saving money, and this is often the most realistic option. By cutting expenses, you can split the money that you save to go towards debt and savings payments.

By balancing both debt and savings payments, you can create a balanced approach that will take you to your financial goals. Visit your local Citizens First Bank to begin budgeting for your future today.