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Loan Protection: Pay off debt rather than save, says expert

UK consumers have been advised to pay off any outstanding debts rather than invest their funds in a savings account, according to an expert.

Ed Bowsher, head of consumer finance at financial advice website lovemoney.com, expressed his belief that the current base rate of 0.5 per cent can be good news for those in debt.

"While interest rates are low, more of your repayments will go towards paying off your actual debt rather than on interest charges," he said.

"Then, when interest rates inevitably rise, your outstanding debt will be smaller and the interest rate rise won't be as painful as it might otherwise have been."

A recent report by Equifax revealed that more than a third (36.1 per cent) of consumers who have accessed their credit file have been making the most of low interest rates to pay off more of their debts.

Although Mr Bowsher acknowledged that this is a good move, he maintained that consumers shouldn't stop saving completely as it is "useful to have a small amount of money you can access easily if things go wrong".

Posted by Amir Hussain

Amir specialises in personal loans, consumer debt and debt management ADNFCR-2776-ID-800302260-ADNFCR



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