Debt repaid at record levels

According to figures from the Bank of England, February saw debt repaid at record levels.

Consumers repaid £245 million of unsecured debt in February – personal loans, credit cards and overdrafts.

This is the largest level of net repayment since 1993 and contrasts with January figures which showed borrowers took out an extra £165 million in credit.

It seems consumers are trying to manage their finances as best they can, even though in this time of recession many household incomes are being stretched in all directions.

With interest rates so low, if debts can be paid off then it can be more beneficial than trying to save money on which only a very poor return is given.

Paying off debt though needs to be carefully managed to ensure you maximise savings.

Pay off the debts that cost the most first but make sure you don’t get hit with any surprise repayment penalties, on unsecured loans for example.

Reducing your outstanding debt can help improve your credit rating. This information, shown on your credit report, is used by lenders to assess your ‘creditworthiness’ should you need to apply for further credit in the future.