Debt Free date?

Greenwellies_2

Hi,

I have seen many of you mention your 'debt free date' in your sig.

How do you calculate this?

Thanks

Greenwellies

never_again_2

go to the following link:

http://www.whatsthecost.com/snowball.aspx

you will need the following for each of your debts:

current amount outstanding
the monthly repayments
the APR
how much you can afford to spend each month in total for repayments

its very simple to use.

best of luck

Greenwellies_2

Thanks for that. I am hopeful that I will only have a loan to clear soon
*fingers crossed* It's a shame it's fixed and can't make over payments.
(ends in 2009 which feels so far away)

Thanks

Greenwellies

Chortle_2

Greenwellies wrote:

Thanks for that. I am hopeful that I will only have a loan to clear soon
*fingers crossed* It's a shame it's fixed and can't make over payments.
(ends in 2009 which feels so far away)

Thanks

Greenwellies

In that case, you 'overpay' into the highest interest savings account you can find, and use that fund to pay off your loan early

Greenwellies_2

Thats a good idea. thanks.

I am sure there is a penalty if I repay the loan early, but it will be good to know I have the money there for a rainy day or something.

Thanks

Greenwellies

Emmzi

No harm phoning up for a settlement figure in writing to see what the charges are. If penalty is less than interest you won't pay, plan to pay it off early.

Greenwellies_2

Perhaps I don't understand this very well.

Years ago I took out a loan, and I repayed it early. I got 11 pence back. It didn't seem worrth it.

I took out a loan about 4 years ago, and then repaid it a couple of months later, I don't think I was any better off doing that.

So this loan I am sure was for 4 years, and I took it out about 1 year ago, so I have 3 years left to pay. I think the interest is 6.4% (might be 6.8%) But I got the impression that the price I repay, is the price I agreed to repay. eg if it was a £100 loan, I agreed to pay £130 over the lifetime of the loan.
I hope that makes sense, maybe you can enlighten me?

Thanks

GW

Chortle_2

If you call and ask for a settlement figure, they should deduct all the interest not yet incurred, even if it was added on at the start of the loan.

So by repaying early, you will avoid some interest, which (hopefully) will be more than the early redemption fee.

HTH

Greenwellies_2

Oh, Now I get it

Thanks, I'm not in a position to settle now, but I am sure making plans to


Thanks

GW

Emmzi

It's not what you get back - it's what you don't have to pay out in the future in interest.

It depends on the loan condition, but the interest is APR - so you should have less interest to pay. e.g

loan amount = 100
interest = 30 per annum

early repayment after 8 months - total payable = 100 + 20 (interest for two thirds of a year)
if early repayment charge less than (30 - 20) = 10, worth paying early.
if more, not worth paying early.

In reality compound interest makes it a bit more challenging.

I'd get a settlement figure in writing, as every bank is different in its charges. Would be happy to look at maths for you, as used to be an evil banker.

But basically, take number of installments left x amount, which gives you total left to pay. Then compare it with the early repayment total to see if it's worthwhile and what if anything you would save.

Emmzi

moozie_2

Chortle wrote:

In that case, you 'overpay' into the highest interest savings account you can find, and use that fund to pay off your loan early

Before MSE, I didn't have a clue about financial organisation and never thought I'd be 'debt free'. After joining the forum, I sort of assumed I'd be debt free when my second loan finishes - Feb 09.

Since I've taken control of my finances and really making an effort to become debt free, I am planning to do exactly as Chortle said. I am using a savings account to save every penny I can at the moment ans then pay off as much as possible off my 0% CC in July. Then once I finish paying off the rest that are 0%, I will be saving even more every month to pay the loans early.

It really does make a difference knowing I am not in the hands of the loan company but it's the other way around. Would have never thought of that pre-MSE