How to Save Money Even With Debt

profile Current Team  |  March 30, 2022

Different ways to save money even with debt include paying off debts with the highest interest rates first, refinancing your loans, getting a personal loan, making sure you never fall behind on your payment schedule, and using different savings options such as Current’s Saving Pods.

How to Save Money Even With Debt

Saving money while you’re still in debt can be a challenge, but it is not only possible, it is also a good idea. Even if you’re paying off your student loans or your credit card, you should regularly put some money into your savings account. You can refinance your loans and even create multiple savings accounts to help you catch up to your debts and save for your future.

You don’t have to be limited by traditional savings accounts either. Current’s Savings Pods offer an alternative way to easily save money toward big purchases by offering an annual bonus rate of up to 4.00% on your money. This means your money is working for you and pays daily on funds simply by enabling the Current Boost feature in the app. For more information, please refer to the Current Boost Terms and Conditions.

Don’t have a Current account? Download our app in the App Store or Google Play and sign up in just two minutes to start saving more

Financial experts recommend that you work on paying off your debts while building up your savings. Too many people focus entirely on whittling down their debt without putting anything aside for their savings, and this can get them caught in an endless cycle of trying to pay off their debt.
This is because money grows with time, and the more time your money has to grow, the better it is for you. If you focused entirely on your student debt, you could potentially spend decades trying to pay that off. When you do, you’ll find you have no wealth of your own.

Even while you are paying off your debt, saving money helps you out in the short-term (if you have a sudden emergency) and the long-term (if you have larger purchases you want to make in the future, like buying a house). If you put your entire paycheck toward your repayment and then incur an unexpected expense (medical or otherwise), you won’t have enough money to cover your immediate needs, and you’ll likely have to rely on debt again to get you through it, trapping you in an endless cycle.

Look at Interest Rates

How can you save money even with debt? First, you should focus on your debt’s interest rate. You absolutely need to know what this is. For example, a credit card’s interest rate is almost 13%, while a student loan’s interest rate is much smaller, usually around 5%.

If you’re looking at a high rate of interest, it’s best to get that out of the way before you think about saving. Otherwise, your savings will just go to paying the interest before you even get to the actual debt.

The fact that student loans have lower interest rates gives you a little more breathing space to save some money. You can get an even lower interest rate on your loans by refinancing them, which is replacing your current loan with a new loan offered through a private lender. With this option, the interest rate might be no more than 3%, but you are required to have a strong credit score for the lender to trust you enough to offer such a low interest rate.

Refinancing Risks

Refinancing might not be an option if your credit score is below 700. If you make it a point to maintain a healthy credit score and perform good credit practices, you can think about refinancing your student loan when you notice your credit score going up.

Another caveat with refinancing your loan is that you agree to waive any form of federal loan protections, such as income-based repayment plans, forbearance, deferment, and loan forgiveness.

Additionally, refinancing your student loan often costs you money, especially if you refinance with a different provider. The higher your outstanding loan amount, the more likely it is that refinancing the loan is worth the initial cost because of how much of a difference the lower interest rate would make to a high loan. If you refinance from the same provider, they may waive the transaction fees.

So if you plan your refinancing carefully, you could save thousands of dollars in interest that you would otherwise have had to pay.

Get a Personal Loan

If you’re looking to save money while paying off your credit card, you could try to get a personal loan. If you meet the requirements for a lower interest rate than you have on your credit card, your personal loan could pay off that debt. Then, you could repay the new loan at a lower rate. This is another way you can save money even when you have debt, allowing you to invest the money that you would otherwise have had to pay for the interest.

However, this also requires a good credit score. If your score is not high enough to get a lower interest rate, you might be better off paying the loan as quickly as you can.

Automate Your Debt Payments

Another way you can save money even with debt is to automate your monthly payments. This ensures that you don’t accidentally fall behind schedule and get hit with late fees or avoidable charges. If you have student loans and you sign up for an automatic payment plan, federal loan services will reduce your interest rate by 0.25%. That may not sound like a lot, but over time, that will amount to considerable savings.

You can also automate transfers to your Current Savings Pod through the round-up feature, which rounds up each purchase to the nearest dollar and transfers the excess funds to your Savings Pod. A little bit each time will add up and reduce the stress of manually transferring money between your checking account and your Savings Pod.

Multiple Savings Accounts and Big Purchases

Another option to save money with debt is to open multiple savings accounts or take advantage of multiple saving programs. This helps you save for an emergency, but also to save for more pleasant things: visiting family, for example, or treating yourself during special occasions.

The key is to keep these multiple savings programs distinct; don’t treat yourself from your emergency fund, and don’t access your discretionary account for mundane, daily expenses. This might feel like a very slow way of repaying your debts, but it is a very sustainable way of saving money and having healthy finances, even while your first priority is obviously to pay off your debt.

When trying to save money and get out of debt, use your credit card(s) sparingly; a good rule of thumb is only for emergencies, and only for big, necessary purchases. A $2,000 TV charged to a card with a 15% interest rate would mean paying $2,500 in interest over 17 years.

Instead, for the big necessary purchases you will inevitably need to make, think about other options. Having multiple savings options means you can afford to pay off more of the purchase up front, reducing the life of the loan. A cash-back rewards card, such as Current’s debit card that gives you points for cash back from purchases at over 14,000 participating merchants, can work with your purchases to help you get some money back to pay off your main debts.

Perhaps the most important way to save money, even when you have debt, is simply to keep going. It will take a long time, and there will have to be some significant lifestyle changes, but if you have a plan to pay off your debts and you stick to that plan, you can save a lot of money in interest, save more of your own money, and then finally reach your financial goals.


5 Ways to Build Up Your Savings Even if You Owe a Lot of Money Elsewhere. (April 2018). Business Insider.

Most Americans Don’t Understand a Money Term That Can Help You Save Hundreds of Thousands of Dollars. (February 2019). CNBC.

Saving vs. Paying Down Debt. (May 2021). Forbes.

How to Lower Your Student Loan Interest Rate. (June 2021). Forbes.

Some Student Loan Refi Rates Start Below 2% — Here’s Exactly How Much Money a Refinance Could Save You Now. (August 2021). MarketWatch.

Pros and Cons of Using a Personal Loan to Pay Off Credit Card Debt. (November 2020). Forbes.

I Used an Expert-Recommended Strategy to Pay Off $40,000 of Student Loans, and 6 Apps Can Help Anyone Do the Same. (July 2019). Business Insider.

Should You Have Multiple Savings Accounts? (January 2021). US News & World Report.

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