Should I Pay Off Debt or Save?

Should I Pay Off Debt or Save?

Should you pay off debt or save? This is an age-old question, one that a lot of the financially troubled find themselves wondering. The answer is that it depends on your goals and the consequences you’re willing to take on. On the one hand, saving is a great option if you’re already making minimum payments and need an emergency fund. However, if you’re not making minimum payments in the name of saving, you’re doing something wrong.

Defaulting or ignoring debt can have serious repercussions on your finances, such as a plummeting credit score, judgments, legal action taken against you, and even repossession of assets. Who wants that?

The question of whether you should pay off debt or save depends on the state of your finances, your goals, and how much you’re willing to lose. Let’s dig in further.

Why Defaulting Is A Terrible Idea

Firstly, it can ruin your life for a long, long time. That’s not overdramatic. It’s the truth. When you default (don’t pay your debt without an agreement with your creditor), you put yourself at risk of collections agencies, getting sued and making a court appearance, having your collaterals seized and a credit score sitting at 0.

Yes, having savings is important to your financial well-being, but paying off debt is more important. Just like credit has the power to change your life for the better, it has the power to ruin it.

Not paying off debt could work if neither you nor your creditor have acknowledged the debt in more than 5 years. The debt then becomes prescribed. You can clean prescribed debt off your credit history and gain immunity from legal action by submitting evidence to the bureaus that neither of you has made contact with. Note that this only works if you have made no effort to pay the debt, either by making a repayment or promise to pay, and if the creditor has not requested payment or taken legal action against you.

Prioritising debt contributes to the betterment of your mental health. You won’t have to worry about legal action, you’ll reduce your debt, and you’ll boost your credit score because of on-time and regular payments. Plus, the less debt you have, the lower your utilisation rate, another major credit score booster.

Don't default, pay your debts instead of saving.

If you can’t afford to make minimum payments on your debt or manage living expenses, contact Debtco Group. We would love to help you get out of debt and take control of your money once more.