Should I Pay Off My Debts or Start Saving?
August 9, 2018 | BY
Whether you’re always struggling to pay off those small cash loans, or just despairing at the thought of spending hours hunting for the best online savings account, you really need to find a better financial balance.
Instead of going to open a savings account with the biggest or nearest bank, carefully consider how to better manage your borrowings, loans and savings by reading this article!
How Debt Cycles Get Out of Hand
Not only do debt cycles cost you a lot of money and stress, but they also stop you from saving money for the future.
Typically, there are 3 ways that a debt will grow from small cash loans.
1. Interest Rates.
A debt will grow naturally over time because a lender will charge you interest on the amount of money that remains outstanding. Banks can charge you interest as high as 15% in some cases – money you could be saving is spent on high interest rates instead.
2. Borrowing to Repay Existing Debt.
If your savings are all tied up in a strict savings account (read more about the limits to these below) you might find yourself borrowing more from a different lender just to repay your original debt. Moving debt around like this can ruin your credit score.
3. Fixed Fees.
Some lenders will charge you fees if you don’t pay back the loan on time, adding even more to your debt.
As you can see, having debts can often mean that there’s no room to open a savings account or even be accepted for future small cash loans. This is unbalanced and something we at Mombo want to change.
Saving money sounds like a wise financial move, but sometimes the wrong savings plan can be as bad as debt! Take education plans for example:
There are specific bank savings accounts and investment schemes where you open a savings account and pay in a set amount each month for your child’s education. These are generally for around 10 years, but sometimes can be for much longer. Each month you pay in a set amount that you won’t get back until your child needs it for education – this is very limiting and often the interest rates you receive is poor.
What if you were to pass away before you finish paying for your child’s education? What if you or your child are in a serious accident and need that money to pay for healthcare? You may need to result to small cash loans despite having saved money for years.
When you open a savings account with a SACCO however, you can withdraw the money when you need it with little hassle. You can even borrow against those savings for long tenors.
Picking the best online savings account means being wise about how you tie down your money.
Finding A Balance
At Mombo, our vision is to provide customers with full control over their financial situation. Having a balance of finances allows you to be in a better situation.
Furthermore, we believe that you shouldn’t have to be dipping into savings before you’ve saved up for the real reason: a wedding or education fees, for example.
Everyone should have the freedom to borrow, pay off loans and save at the same time. Small cash loans are great for small emergencies while having savings should allow you to borrow for longer periods of time – having a balance of savings and loans allows you to do more with your money.
How Mombo Can Help
When you open a savings account with Mombo SACCO, you can borrow up to 5 times your savings for up to 48 months. Your savings stay where they are, and you get the funds you need in the meantime. When you open a savings account with a bank, you’re often required to provide collateral and charge per annum – sometimes as much as 15%. Mombo SACOO offer you credit based on your savings – and you repay at a cheaper interest rate than banks.
And then there’s MomboiCapital for borrowing larger amounts and investments. You can borrow up to 50% of your net salary for 6 months, rather than rely on small cash loans. Save with Mombo SACCO for access to big loans and use MomboiCapital for emergency loans: a great way to avoid the debt cycle and manage all your finances in one place!
All of this is available via the Mombo app, so why not check that out instead of hunting for the best online savings account?