After a few months of repayments, any debt can start to feel like a burden that hangs above your bank account waiting to swipe away money. From mortgages to car loans and everything in between, it’s tempting to try and pay off your debts early and start putting that spare money towards savings or luxuries. In many cases, paying off debt quickly is a great idea – but it doesn’t always make good financial sense. We’re taking a look at some of the most common types of debt to consider whether early repayment is a sensible goal to work towards.


Overpaying your mortgage is a great way to reduce financial stress in later life. After all, if you manage to pay off your home loan quickly it will allow you to eliminate one of your biggest monthly expenses. This is a great option for people who have a lot of extra income currently but don’t know whether they’ll still have money to spare in the future.

However, with mortgage interests currently sitting at pretty low rates, you may be able to get more bang for your buck if you focus on building up your pension or savings instead. Similarly, if you have more expensive debts (such as credit cards or a bank loan), then you’ll save more in the long-term by paying those off first.

Credit cards

The longer your credit card debt hangs around, the more you’ll pay in interest, so it makes sense to pay your credit card debts as quickly as you can. If you’re able to pay off the balance in full then we say do it, and if not then try to pay as much as you can above the minimum payment each month. Credit cards charge a lot of interest, making them one of the more expensive types of debt. In most cases, the money you’ll save in interest payments beats anything you could earn by putting the cash into a savings account.

Car loans

If your car repayments fit into your monthly budget without causing you too much financial stress then it might not be worth the hassle of repaying the loan early. Although you will save yourself on some interest, there are also early repayment fees to consider – so you’ll need to do the calculations to make sure that you’re actually going to be making a saving! That said, if you’re paying a lot of interest each month and find yourself with enough spare cash to pay it off in one go, then it may reduce the total amount that you pay.

Another consideration here is the fact that making regular car repayments looks great on your credit file. Paying it off early could actually reduce your credit score, as you’ll no longer have proof that you can stick to the regular monthly payment plan.

Student loans

For most people, paying off your student loan early is a bad use of money. Because student loan interest is so low, you can usually earn more by putting your cash into a high interest savings account or a stocks and shares ISA. The amount you pay towards your student loan is based on how much you earn, so those on lower incomes don’t need to make repayments at all. Plus, any remaining debt will be wiped completely after 30 years – so unlike credit cards and loans, this isn’t something that will hang over your head indefinitely. For all these reasons, we think it’s better to use your spare cash for building up savings or paying off other types of debt.