Should You Pay Down Debt or Focus on Saving?

General

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If you carry a lot of high-interest debt, you may feel pressure to become debt-free. Many famous financial experts prioritize eliminating debt payments, and you’ll find plenty of YouTube videos highlighting the detriment of carrying a credit card balance.

Ideally, everyone would have the cash on hand to handle any financial situation that arises. But focusing on paying off debt to the point that you neglect saving for a rainy day can actually make staying financially secure harder.

Paying off debt and saving are both worthy financial goals. Learn how to decide which is the best option for you.

Pay down debt vs. save

When you have high-interest debt and minimal savings, prioritizing your next move may feel overwhelming. Your first priority is making a master list of all your debt. Include each lender’s name, the type of debt, the total amount you owe, your minimum payment amount, due date, and interest rate.

Once you have a list, you can order your debts from lowest to highest balance or from highest to lowest interest rate.

Tip: If you have payday loans, paying off this debt should be your top priority. These loans typically have astronomical interest rates and can trap you in an endless cycle of debt if you don’t eliminate them quickly.

You should also make a list of any savings you have (including retirement and investment accounts) to get a complete picture of your current financial situation.

Pros of paying off debt

Paying off your debt before aggressively building a savings account has several benefits, including:

You can build a stronger credit score. Reducing your debt will increase your credit score, which can make it easier to qualify for a home loan or car loan in the future. Lower balances on your credit cards equal a lower credit utilization ratio.
Eliminating debt can reduce stress. Debt, bankruptcy, and foreclosure can be extremely stressful. Freeing up money by eliminating debt can alleviate some of that stress and provide a sense of security.
A lower debt balance saves you money. Your credit cards and loans charge interest as a percentage of your loan balance. The more debt you pay off, the less interest you’ll pay over time. Paying off loan balances early can save you hundreds or thousands of dollars in interest.

Here’s an example of how paying off your credit card debt sooner can help you save.

If you have a credit card balance of $5,000 with a 20% interest rate and a minimum payment of $150 per month, it’ll take you just over four years to pay off, and you’ll pay $2,359 in interest.

But if you double your minimum payment and make $300 payments on the same credit card, it’ll take you 20 months to pay off (just under two years), and you’ll pay $907 in interest. That’s a difference of $1,452.

Debt repayment strategies

When you’re paying off a lot of debt, two popular repayment strategies may help you stay on track:

These methods work well if you don’t add to any of the balances you’re paying off. Both options can help you pay off debt faster; you just need to decide which option will motivate you the most.

If you’re struggling to handle multiple monthly payments, consolidating your debt into a single loan with one monthly payment can make debt repayment easier to manage.

Our personal loan calculator can help you get an idea of what your monthly payment amount might be. Just plug your loan amount, interest rate, and repayment term into the fields below.

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Pros of prioritizing saving

Prioritizing saving over paying off debt quickly also has some benefits, including:

You can take advantage of compound interest. Compound interest accrues on both the principal and any accumulated interest, which can increase your savings substantially over time. Investing in an IRA or 401(k) is a great way to take advantage of compound interest.
An emergency fund can prevent future debt. Having three to six months’ worth of expenses saved in an emergency fund can ensure you don’t have to charge an unexpected medical bill or car repair on your credit card. Setting up even a small safety net can help protect you in the future.
You can work toward goals on your financial timeline. Focusing on saving allows you to make progress toward long-term goals, like retirement, so you don’t feel so far behind in the future.

Here’s an example of how compound interest can boost your savings.

Let’s assume an initial savings balance of $1,000 and a monthly contribution of $150 over three years. Your total investment over three years is $6,400. But with an interest rate of 10% compounded annually, your savings balance at the end of three years would be $7,289. That’s $889 you earned without doing anything except putting your money in an account.

Is it possible to pay off debt and save?

You can pay off debt while building your savings account, but you’ll need to have a plan and you’ll need to be consistent. You can prioritize both by saving $500 in an emergency fund before putting any extra money toward debt.

You should eliminate any toxic debt, like payday loans, as quickly as possible because they’ll only make it more difficult to save or pay off debt. If you have this type of debt, a debt consolidation loan could help eliminate this high-interest debt for a loan with a lower interest rate.

If you’re looking for a debt consolidation loan, we can help you get started. The personal loan companies in the table below compete for your business through Credible. You can request rates from all these partner lenders by filling out just one form (instead of one form for each) and without affecting your credit score.

Lender	Fixed rates	Loan amounts
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	9.95% – 35.99% APR	$2,000 to $35,000^**
Fixed APR: 9.95% – 35.99% APR Variable APR: N/A Min. credit score: 550 Loan amount: $2,000 to $35,000** Loan terms (years): 2, 3, 4, 5* Time to fund: As soon as the next business day (if approved by 4:30 p.m. CT on a weekday) Fees: Origination fee Discounts: Autopay Eligibility: Available in all states except CO, IA, HI, VT, NV NY, WV Customer service: Phone, email Soft credit check: Yes Loan servicer: Avant Loan Uses: Debt consolidation, emergency expense, life event, home improvement, and other purposes Min. Income: $1,200 monthly
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	6.79% – 17.99% APR	$10,000 to $50,000
Fixed APR: 6.79% – 17.99% APR Variable APR: N/A Min. credit score: 700 Loan amount: $10,000 to $50,000 Loan terms (years): 3 to 6 Time to fund: Next business day Fees: No prepayment penalty Discounts: None Eligibility: Available in all 50 states Customer service: Phone Soft credit check: Yes Min. Income: Does not disclose Loan Uses: Debt consolidation, home improvement, self-employment, and other purposes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	4.99% – 35.99% APR	$5,000 to $50,000
Fixed APR: 4.99% – 35.99% APR Variable APR: N/A Min. credit score: 600 Loan amount: $2,000 to $50,000 Loan terms (years): 2, 3, 4, 5 Time to fund: As soon as 1 – 3 business days after successful verification Fees: Origination fee Discounts: None Eligibility: Available in all states except DC, IA, VT, and WV Customer service: Phone Soft credit check: Yes Loan servicer: Best Egg and Blue Ridge Bank Min. Income: None Loan Uses: Credit card refinancing, debt consolidation, home improvement, and other purposes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	5.99% – 24.99% APR	$2,500 to $35,000
Fixed APR: 5.99% – 24.99% APR Min. credit score: 660 Loan amount: $2,500 to $35,000 Loan terms (years): 3, 4, 5, 6, 7 Time to fund: As soon as the next business day after acceptance Fees: Late fee Discounts: None Eligibility: Available in all 50 states Customer service: Phone Soft credit check: Yes Loan Uses: Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	7.99% – 29.99% APR	$7,500 to $50,000
Fixed APR: 7.99% – 29.99% APR Min. credit score: Does not disclose Loan amount: $10,000 to $50,000 Loan terms (years): 2, 3, 4, 5 Time to fund: As soon as 2 business days Fees: Origination fee Discounts: No Eligibility: Available in all states except CO, CT, HI, KS, NH, NY, ND, OR, VT, WV, WI, and WY Customer service: Phone Soft credit check: Yes Min. Income: None Loan Uses: Debt consolidation, home improvement, wedding, travel, medical expenses, and other purposes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	7.04% – 35.89% APR	$1,000 to $40,000
Fixed APR: 7.04% – 35.89% APR Min. credit score: 600 Loan amount: $1,000 to $40,000 Loan terms (years): 3, 5 Time to fund: Usually takes about 2 days^† Fees: Origination fee Discounts: None Eligibility: Available in all 50 states Customer service: Phone, email Soft credit check: Yes Loan servicer: LendingClub Bank Min. Income: None Loan Uses: Debt consolidation, paying off credit cards, home improvement, pool loans, vacations, and other purposes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	7.99% – 35.99% APR	$2,000 to $36,500
Fixed APR: 7.99% – 35.99% APR Min. credit score: 580 Loan amount: $2,000 to $36,500 Loan terms (years): 2, 3, 4 Time to fund: As soon as the next business day Fees: Origination fee Discounts: Autopay Eligibility: Available in all states except NV and WV Customer service: Phone, email Soft credit check: Yes Min. Income: $20,000 Loan Uses: Home improvement, consolidate debt, credit card refinancing, relocate, make a large purchase, and other purposes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	3.49% – 19.99% APR	$5,000 to $100,000
Fixed APR: 3.49% – 19.99% APR Min. credit score: 660 Loan amount: $5,000 to $100,000 Loan terms (years): 2, 3, 4, 5, 6, 7* Time to fund: As soon as the same business day Fees: None Discounts: Autopay Eligibility: Available in all states except RI and VT Customer service: Phone, email Soft credit check: No Loan servicer: LightStream Min. Income: Does not disclose Loan Uses: Credit card refinancing, debt consolidation, home improvement, and other purposes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	6.99% – 19.99% APR¹	$3,500 to $40,000²
Fixed APR: 6.99% – 19.99% APR¹ Min. credit score: 660 (TransUnion FICO®️ Score 9) Loan amount: $3,500 to $40,000² Loan terms (years): 3, 4, 5, 6 Time to fund: Many Marcus customers receive funds in as little as three days Fees: None Discounts: Autopay Eligibility: Available in all 50 states Customer service: Phone Soft credit check: Yes Loan servicer: Goldman Sachs Min. Income: $30,000 Loan Uses: Credit card refinancing, debt consolidation, home improvement, major purchase, and other purposes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	18.0% – 35.99% APR	$1,500 to $20,000
Fixed APR: 18.0% – 35.99% APR Min. credit score: None Loan amount: $1,500 to $20,000 Loan terms (years): 2, 3, 4, 5 Time to fund: As soon as the same day, but usually requires a visit to a branch office Fees: Origination fee Discounts: None Eligibility: Must have photo I.D. issued by U.S. federal, state or local government Customer service: Phone, email Soft credit check: Yes Min. Income: Does not disclose
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	5.99% – 24.99% APR	$5,000 to $40,000
Fixed APR: 5.99% – 24.99% APR Min. credit score: 600 Loan amount: $5,000 to $40,000 Loan terms (years): 2, 3, 4, 5 Time to fund: As soon as 2 – 5 business days after verification Fees: Origination fee Discounts: None Eligibility: Available in all states except MA, NV, and OH Customer service: Phone, email, chat Soft credit check: Yes Min. Income: None Loan Uses: Debt consolidation and credit card consolidation only
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	4.99% – 17.99% APR	$600 to $50,000 (depending on loan term)
Fixed APR: 4.99% – 17.99% APR Min. credit score: 660 Loan amount: $600 to $50,000* Loan terms (years): 1, 2, 3, 4, 5 Time to fund: 2 to 4 business days after verification Fees: None Discounts: None Eligibility: Does not disclose Customer service: Phone, email Soft credit check: No Min. Income: Does not disclose Loan Uses: Debt consolidation, home improvement, transportation, medical, dental, life events
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	7.95% – 35.99% APR	$2,000 to $40,000
Fixed APR: 7.95% – 35.99% APR Min. credit score: 640 Loan amount: $2,000 to $40,000 Loan terms (years): 3, 5 Time to fund: As soon as one business day Fees: Origination fee Discounts: None Eligibility: Available in all states except IA, ND, WV Customer service: Phone, email Soft credit check: Yes Min. Income: None Loan Uses: Debt consolidation, home improvement, vehicles, small business, new baby expenses, and other purposes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	6.99% – 21.78% APR¹⁰	$5,000 to $100,000
Fixed APR: 6.99% – 21.78% APR¹⁰ Min. credit score: Does not disclose Loan amount: $5,000 to $100,000 Loan terms (years): 2, 3, 4, 5, 6, 7 Time to fund: 3 business days Fees: None Discounts: Autopay Eligibility: Available in all states except MS Customer service: Phone, email Soft credit check: Yes Min. Income: Does not disclose Loan Uses: Solely for personal, family, or household uses
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	8.93% – 35.93% APR⁷	$1,000 to $20,000
Fixed APR: 8.93% – 35.93% APR⁷ Min. credit score: 560 Loan amount: $1,000 to $50,000 Loan terms: 3 to 5 years ⁸ Time to fund: Within one day, once approved⁹ Loan types: Debt consolidation, pay off credit cards, home improvements, unexpected expenses, home and auto repairs, weddings, and other major purchases Fees: Origination fee Discounts: Autopay Eligibility: A U.S. citizen or permanent resident; not available in DC, SC, WV Customer service: Phone, email Soft credit check: Yes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	5.94% – 35.97% APR	$1,000 to $50,000
Fixed APR: 5.94% – 35.97% APR Min. credit score: 560 Loan amount: $1,000 to $50,000* Loan terms (years): 2, 3, 5, 6 Time to fund: Within a day of clearing necessary verifications Fees: Origination fee Discounts: Autopay Eligibility: Available in all states except West Virginia Customer service: Email Soft credit check: Yes Min. Income: Does not disclose Loan Uses: Debt consolidation, credit card refinancing, home improvement, and other purposes
Credible Rating Credible lender ratings are evaluated by our editorial team with the help of our loan operations team. The rating criteria for lenders encompass 78 data points spanning interest rates, loan terms, eligibility requirement transparency, repayment options, fees, discounts, customer service, cosigner options, and more. Read our full methodology.	4.37% – 35.99% APR⁴	$1,000 to $50,000⁵
Fixed APR: 4.37% – 35.99% APR⁴ Min. credit score: 580 Loan amount: $1,000 to $50,000⁵ Loan terms (years): 3 to 5 years⁴ Time to fund: As fast as 1 business day⁶ Fees: Origination fee Discounts: None Eligibility: Available in all 50 states Customer service: Phone, email Soft credit check: Yes Min. Income: $12,000 Loan Uses: Payoff credit cards, consolidate debt, take a course or bootcamp, relocate, make a large purchase, and other purposes
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All APRs reflect autopay and loyalty discounts where available \| LightStream disclosure \| ¹⁰SoFi Disclosures \| Read more about Rates and Terms

Setting up a monthly budget is vital when trying to pay off debt and save. Once you have all your monthly expenses listed, see if you can eliminate any expenses you don’t need, like forgotten subscriptions that you no longer use or spending money on takeout multiple days a week. You can split the extra money between savings and paying off debt in any ratio that makes sense for your budget. For example, if you have an additional $200 per month, you can put $150 toward paying off debt and deposit $50 into a savings account.

Every little bit that you can set aside for both goals will help build your financial safety net.

Can a personal loan help you pay down debt?

Consolidating your high-interest debts with a personal loan can make it easier to pay off debt. You’ll only have one monthly payment to keep track of, and you may be able to get a lower interest rate.

Personal loans often have lower interest rates than credit cards, so you could save money on your total debt. Your credit score will affect the type of rates and personal loans you qualify for, though: The higher your score, the better the interest rates you’ll likely get.

A word of caution: Once you’ve used a personal loan to consolidate your debt, don’t fall into the trap of charging up your credit cards again. If you need help managing your debt, consider talking to a credit counselor.

Financial security might feel elusive, but taking time to understand your financial situation can help you figure out how to best move forward with paying down debt and saving. It’s important to pay down debt, and it’s essential to save, but only you can decide how to prioritize using extra funds to best meet your needs.

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About the author

Angela Brown

Angela Brown is a student loan, personal finance, and real estate authority and a contributor to Credible. Her work has appeared in Fox Business, LendingTree, FinanceBuzz, and Yahoo Finance.

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