Debt Reduction

Many people reach a stage in which they either have some money left over each week or receive a lump sum with which they can begin to save. However, they may also be repaying debt. The question often asked by those in such a situation is, whether they should use the money now earmarked for savings to pay off their debt faster.

In most instances, particularly in these days of low inflation, the answer is almost universally “yes, it is beneficial to pay off the debt first”. Whether it’s repaying the mortgage or paying off a car loan, the money you save in interest costs will, in most cases, be higher than any gains you make through your investments. Repaying debt is also, in effect, a risk-free investment – and there aren’t too many of those out there.

 

 

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