Snowballing order

boltonangel

i understand the concept of snowballing but am confused by one prbably simple thing.

i have the following debts -

Tesco Loan - £8100 outstanding with 4 and a half yrs to go, £170p/m @ 6.5%
Amex nectar card - £3000 outstanding 5.9% for life of balance, £80p/m min repayment
Abbey Card - £3000 outstanding 0% run out in june, £80p/m min repayment

i have an extra £110 available p/m to throw at these, but am wondering which to start with. i was going to go for the tesco loan, but after speaking to the nice tesco loan man he pointed out that even if i repaid the tesco loan early i would still be paying the same amout back, as interest is added upfront. i have been paying it since May 05 and originally borrowed £8700. he suggested i save the ££ in a savings acc, earn interest then repay the teco loan that way.

what do you thnk is the best way to repay it?

Little_Miss_Winner

GO TO;- https://www.whatsthecost.com/snowball.aspx

Enter all your debts and aprs. And enter the total amount you have to throw at it each month.

the calculator will work it all out for you showing which order to pay, and how long it will take you.

Let us know how you got on?

Regards
pot

boltonangel

thanks for that.

i wasn`t clear enough, but what i mean is do tesco charge their interest up front or not, i really would love to clear that debt, but if it's not worth it, then i'll tackle the cards first.

Conor_3

THe advice the Tesco bloke gave wasn't far off as there are a few places offering 5-6% interest on savings.

us,thecat&thedebt

hi
our llyods loan is like that only our intrest rate is 16.9%
when you take out the loan some companies add the intrest to the borrow balance for example is borrow 5000 that will incur say 1500 of intrest then you basically take a loan for 6500...

we did the snowball thing but make sure you enter your remaining balance and 0% as the intrest rate otherwise it will add more intrest on to the balance...

i def reccomend putting the excess in an isa if you can so it incurs tax free intrest...
hth

angelica

As I understood all RBS (Tesco is part of RBS group) loans are like you explained with interest added upfront, but during last year rules changed and all new loans can be repaid earlier with the interest reduction. But even with new loans you need to ask for the early settlement figure. If you just make extra payments and leave rest of the loan to end naturally, they will charge you full amount of interest anyway.

Only if you are able to repay the whole outstanding balance, phone their loan department, ask for early settlement figure and you probably will save on interest. In your current situation I guess you have to pay your monthly payments to Tesco as usual and make extra payments to other credit providers, eg Amex Nectar.

For the 0% Abbey: hopefully you will be able to get a new 0% card in May-June and move the balance there.

Alleycat

Hi, just checked out Tesco loan agreement. 6.5% APR, fixed rate. Basically the blurb says that yes you can repay early and you will only incur up to two months 'extra' interest.

"If you decide to repay your loan early, you are entitled to a rebate on the total charge for credit. In accordance with the Consumer Credit Act 1974, we are allowed to defer the settlement date used to calculate the rebate by no more than two months. This is intended to compensate the lender for costs normally recovered over the full period of the loan."

You have the right to settle your loan agreement at any time, by giving notice in writing and paying off all amounts payable under the agreement, which may be reduced by a rebate. So basically as angelica is saying, it sounds like you would have to request an early settlement figure, pay this including the extra two months interest added. The loan interest would be recalculated and if any overpayment you would be due a refund.