Please help, Is it worth me switching my LOAN

Rosco1112

Hi, everyone.

Last November I took a £5000 loan out with Alliance and Leicster at 10.9% apr. I am paying them £127 a month. I have £5000 saved now so I phoned them up to settle the loan but they told me I would only save about £400 if I were to settle it now and could probably get more than that if I just stuck my money I have saved into a bank. So my question is I have heard of people switching their loans with other company's would it be worth me doing this? Any help would be much appreciated, thanks

Bokken_2

Difficult to say really as you should get rid of outstanding debt first before stoozing the profits .As long as you don't run up debts again or spend your savings then it will be okay.
A&L estimate that you will save £400.
If you keep the 5000 in a saving account for the remainder of the loan period you would not make £400.
You are also paying interest on the outstanding loan amount,
Your £5000 in a saving acc. @ 5% (gross) would only earn you £200 over the whole year.
If you could get another loan from another company for £5000 at say 6% you would still be loosing out to the difference at 1% and you have to deduct tax from any savings.
On top of this there are Balance Transfer fees normally 2% or a max of £50 to consider.

grumbler

Rosco1112 wrote:

Last November I took a £5000 loan out with Alliance and Leicster at 10.9% apr. I am paying them £127 a month.

This means that the loan term was 49 (48?) months. You have about 33 months left.

...I phoned them up to settle the loan but they told me I would only save about £400 if I were to settle it now

This means that borrowing £127*33-£400=£3791 for 33 monts will cost you £400. This is equivalent to 7.2% APR in my estimation. You cannot get such high rate on savings. 7.2%APR should be your starting point when thinking about switching.