Should You Stop Saving to Repay a Loan or Credit Card?

Sep 3

2 min read

When money is tight, it can feel like you have to choose: save money or pay off your debt.

When you're paying interest on your debt, paying it off sooner can mean paying less interest overall and becoming debt-free faster.

But stopping your savings completely can leave you without a financial cushion when an unexpected expense comes along.

So, what do you do?

Keep saving, even if it's less

You don't necessarily need to stop saving while you repay a loan or credit card.

Depending on your circumstances, you may be able to continue saving while you repay your borrowing by reducing the amount you’re putting aside.

Even a small amount saved regularly can help you keep the habit going and give you something to fall back on.

Think about it this way:

Instead of: Stop saving → Repay loan → Start saving again

Consider: Reduce savings → Repay loan → Increase savings when the loan ends

There's no magic amount you need to save. If you're currently putting £100 a month into savings, for example, you might decide that £25 or £50 is more manageable while you're repaying your borrowing.

The important thing is finding an amount that works for your budget.

What about paying off the loan faster?

It's important not to forget the other side of the equation.

If your borrowing charges interest, paying more towards it could mean paying less interest overall and clearing the balance sooner (depending on the terms of your borrowing.)

That's why it's about finding a balance, rather than choosing one over the other.

And there is another option that can help you do both.

Save while you repay

Some lenders like Plane Saver Credit Union offer Save As You Repay, a scheme that allows borrowers to save with their monthly loan repayment.

That means you're paying off your borrowing while building a financial cushion at the same time.

For example:

You could repay £100 a month to your loan then add £25 on top for savings.

After 5 years, you could have £1,500 saved by the time your loan is paid off, and that's before applicable interest or dividend.

Having money set aside could give you another option when an unexpected bill comes along, help with a planned expense, or simply give you a little more breathing room.

Of course, saving alongside borrowing doesn't mean you'll never need credit again. But having some savings can help you avoid turning every unexpected expense into another borrowing decision.

What's right for you?

There's no one-size-fits-all answer.

Take a look at your budget and think about:

How much can you comfortably afford to repay?
How much do you already have saved?
Would you have anything to cover an unexpected expense?
Could you reduce your savings temporarily rather than stopping altogether?
What could you save once your borrowing is paid off?

The aim is to make progress without putting extra pressure on your budget.

Want to save while you repay?

Find out more about Plane Saver's loans and Save As You Repay and see whether it's right for you.