Pay off a loan.... or not??

Lindylou54

We have a loan which the monthly payment is £275 per month, the rate is 5.7%, there is approximately 18 months left on the loan. However, by October the settelement figure on this loan will be £4,500 which we will be able to pay off, thereby freeing up the amount to throw at the mortgage.

Presently we have an offset mortgage with the Woolwich, at 5.69%, can make as many overpayments as we want, and we do.

My query is, do I pay off the loan and throw the extra at the mortgage, pay the £4,500 off the capital of the mortgage, or leave it in the savings account to offset.

Your observations would be appreciated.

Many thanks

ema_o

Is the mortgage fixed at 5.69%?
The reason for asking is either option works at the moment. However if your mortgage rate could change then depending whether it goes up or down you will be better off paying one or the other (sorry if I'm stating the obvious).
Either way if it were me I would be tempted to put it in the savings account to offset providing that you would be able to leave it there that is!!

Locoblade

As the rates are nigh on identical it won't make very much difference in terms of money saved doing by doing one thing or other, but it would be marginally beneficial to pay off the loan because of the 0.01% difference.

If your mortgage is a tracker and the rates drop, then paying the loan off would certainly be best, if the rates rise then keeping it and putting the money against the mortgage would be better, either in the offset savings or paid off the mortgage capital (makes no difference).