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If you're left with 'spare' money at the end of a month, does it make more sense to save it or to use it to overpay your debts? As you'd expect, there are good reasons to do either - there's no clear-cut answer which will be right in every case. So, here's a look at a few of the things you should consider... Clear debt; don't save Most debts charge a lot more in the way of interest than you could expect to make on your savings. These days, you'd be lucky to find a savings account paying significantly more than 4%. Most credit cards - to pick a common form of debt - charge around 17%. So getting rid of an extra Ă‚ÂŁ100 on your credit card balance will save you a lot more than you'd make by putting that same money into a savings account. Credit card debts are particularly well known for having low minimum payments, so you could easily spend years clearing a relatively small debt. It's tempting to make just the minimum payment every month, but this can keep you in debt a lot longer - and cost you a lot more - than necessary. Overpaying that debt every month could be a great way to cut not just the time spent clearing it, but also the amount of interest it'll accrue in the meantime. Plus, how relieved would you feel if you could actually clear one of your debts altogether? If you're one of the many people with multiple debts, the thought of getting down to four - or three, or two debts might sound particularly appealing, regardless of how much you actually owe each lender. This could give you the motivation you need to keep on overpaying your debts until you've cleared them all. If you are dealing with multiple debts and wondering which - if any - to overpay first, it's well worth getting some debt advice. Different kinds of debt work in very different ways, and talking it over with an expert can help you make the right decision. Save; don't clear debt Having said that, many people choose to save their spare money even when they're still carrying debts. Having 'money in the bank' is a good feeling, and it's great to know you'll be able to afford the kind of unexpected costs that are likely to come up, whether it's fixing the car, repairing the roof, or replacing an important appliance like a freezer.

In terms of interest, it may make more financial sense to clear the debt first, but as long as they're comfortable with the debt that they're carrying (and the interest they're paying on it), putting some money into savings could be a good idea - after all, their debt may be costing them money, but they'll have the peace of mind of knowing that they're prepared for emergency demands on their finances. And don't forget that some forms of debt don't actually charge interest - like certain overdrafts, or credit cards while you're in your 0% balance transfer period. This is something you'd have to take into account when you're thinking about the best way to use your money. Of course, you could see that interest-free period as an opportunity to reduce that debt by as much as possible before it starts charging interest! No debts? Finally, if you're not carrying debts, it's all a lot more straightforward. The more you can put in the bank, the better you'll be protected against financial worries in the future. If you can save £100 a month, that's £1,200 a year, or £12,000 over the course of a decade - plus interest... And if you are carrying debts, perhaps the thought of being in that position can help inspire you to clear your debts as fast as realistically possible. Again, if you're not sure about the best way forward, it's well worth getting some debt advice.

Melanie Taylor is a financial expert for Think Money, a debt advice provider in the UK. If you would like to learn more about budgeting and debt, or to find some more debt advice tips click here to visit Think Money.

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