Top of main content

Save? Or pay off debt?

Getting into a savings habit is important, but so is making sure that you can manage any high interest debts you have.

In purely financial terms, deciding whether to pay off a debt, or to start saving regularly, is clear cut:

If you're paying more interest on your loan or debt than you're earning on your savings, pay off the debt first.

For example, if you have savings in an account earning 2% interest, but you have credit card debt that you're paying 19% interest on, it's sensible to pay off the credit card debt first, before putting money into the savings account. 

However, this rule doesn't apply to every situation. For example, mortgages, and certain loans, have fixed repayment terms that are not negotiable. If possible, you should try and build up savings in addition to making those payments.

There are 3 key things to consider:

  1. Interest rate
    If you have high interest debt, such as credit cards, these should usually be your number one priority. If you have several debts, it's typically best to prioritise the ones charging the highest interest rates first.
  2. Unexpected costs
    It may be sensible to build up an emergency savings fund, to cover unexpected costs, before focusing on paying down other debt.
  3. Early repayments and break fees
    Certain loans and borrowing come with penalties or fees if you pay them back early. You should check the terms of any borrowing carefully before opting for an early repayment.

A blended approach could make sense. Referring to the example above, you might:

  • tackle high interest debt, like credit cards
  • build an emergency savings fund, to meet unexpected costs like home repairs or losing your job
  • get into a savings habit by putting a regular amount each month into a savings account
  • make a plan to pay off lower interest, longer term debts
  • plan longer term savings to meet your financial goals


For persons in India. This publication has been issued by The Hongkong and Shanghai Banking Corporation Limited (HSBC), India, Incorporated in Hong Kong SAR with limited liability, for the information of its customers only. This publication does not constitute investment advice or an offer to sell, or a solicitation of an offer to purchase or subscribe to any product / investment. The information herein is derived from sources believed to be reliable and the concerned Information Provider(s) have duly authorised HSBC to use such information provided by them. Whilst every care has been taken in compiling the information, HSBC and the concerned Information Provider(s) do not guarantee, or make any representation or warranty and accept no responsibility or liability as to its accuracy or completeness and shall not be liable for damages arising out of any person's reliance upon this information or any action taken or not taken as a result of any material contained in the publication. Expressions of opinion are those of HSBC and the Information Provider(s) only and are subject to change without notice. HSBC has not independently verified any information provided by the Information Provider (s) or that has been derived from the sources believed to be reliable by HSBC. Opinions expressed herein do not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this publication. This document is for circulation in India only. No part of this publication may be reproduced or stored in a retrieval system without the prior written permission of HSBC. Any liability is accordingly expressly disclaimed by HSBC, its officers, directors and employees.