Deciding between repaying debt or saving for a house deposit: What’s Smarter?

Thinking about whether to pay off your credit card debt or save up for a house deposit is a bit like deciding if you want ice cream or cake. Both choices have good points, but picking one can really change your money situation and how soon you might be able to buy a home.

 

Why Paying Off Debt Can Be a Good Idea?

Let's say you have a credit card debt, and the interest rate (that’s the extra money you pay on top of what you borrowed) is pretty high—like around 24%. At the same time, you’re trying to save money in a bank account that gives you 5% interest back, but it’s not much.

Paying off the debt first makes sense because the interest you're avoiding on the debt is a lot more than the interest you're earning from your savings. It's like stopping water from leaking out of a bucket before trying to fill it up. Plus, getting rid of debt can make your credit score better, which is a number that shows banks how good you are at managing your money. A better score can make it easier to get a better deal on a mortgage for a house.

 

The Argument for Saving for a House Deposit

On the other side, saving for a house is a big goal. House prices can go up quickly, and if you wait too long to start saving, you might find it harder to catch up. Having a bigger deposit can also make banks more likely to lend you money and likely even at a better interest rate, making your mortgage cheaper in the long run.

 

What’s the Best Move?

Really, the smart choice depends on your own money situation. For some, paying off debt fast is the way to go. For others, saving a bit while slowly paying off debt works better. You could try using online tools to see what makes sense for you, or talk to a professional, like a financial adviser.

The key is to make a plan that fits your life and stick to it. Whether you’re focusing on clearing debt or saving for that dream house, moving forward with a clear goal is what’s important.