Pay off Debt or Keep Money in Savings

So we are trying to save money for a house and pay off debt at the same time. I have money that could pay off a good portion of my debt, but it will take away from my savings for a down payment on a house. Our plan is to buy next year. Should I pay off the debt now or pay as I can and keep my savings?


Ah, I really think it depends! I’d probably spend some time mapping out both paths to assess where you’d be this time next year if you chose to pay off the debt now vs. if you paid as you can and kept your savings.

This topic has come up in various forms in the community, so sharing a thread that may provide some meaningful perspective:@ann.hay asked Should I use my savings to pay off student loan debt? last year. There were some great replies in there — tagging @jeremym who shared some great questions to consider.

Also tagging @robin.hartill, CFP®, and @kellyfromkeene. Curious if you ladies have any input on this one!

Thank you for the tag @maryann.

My thought is to pay off debt first for a few reasons: You will feel great once it’s paid off! And its easier to get a loan when your dent to income ratio is lower.

However, I don’t know your circumstance and how set in stone the purchase plans are for next year, or how much debt you have, and how much savings you have. All these things should factor into your decision.

You should consider talking with a Housing Counselor. (I’m learning all about this truly awesome resource!) I coped and pasted info below.


Want advice on buying a home, renting, default, foreclosure avoidance, credit issues or reverse mortgages? HUD sponsors housing counseling agencies throughout the country to provide free or low cost advice. Search online for a housing counseling agency near you, or call HUD’s interactive voice system at: (800) 569-4287."…_a_housing_counselor


You can pay debts off while keeping your savings in the account, allowing them to earn interest and dividends. It’s just a matter of knowing the right tools, having the desire to get out of debt and stay out of debt, being determined to do what it takes to achieve it, and having the discipline to do the work. All the tools we need are well known, been around for hundreds of years, safe and easy to use. It’s just a matter of knowing.