Up monthly payments or save to pay lump sum????

Beakatron

Hi there,

I've currently got a Lloyds TSB Loan that I've been paying off for about 6 years. Around 4 of those years I have been paying it through All Clear Finance as I couldn't afford the repayments. I have now stopped using All Clear Finance as I feel I can take control of my debts now and would rather the extra £30 a month that I was paying them goes to paying off the debts!

So, I owe about £5700 (I need to check this I think it may be nearer £5100) and I am paying £100 per month at the mo. I've recently had a letter through from them showing the payments I have made and I am getting charged about £58.00 per month in interest!!! So basically it's going to take me forever to pay.

I have decided to start saving money up to pay the loan of in one lump sum, they have already offered a settlement figure of £2700 but I'm hoping to try and get this lower. My questions is, is this the best way to pay it off????

Any advice greatly appreciated.

Bells&Whistles

I can't offer advise on your question as I am in the same boat with an RBS small loan... would be interested to see what people advise

Tixy

Glad you have stopped using a fee charging company - you should be able to manage this be yourself.

A 47% settlement figure is not bad - if you do go down the route of a settlment figure you need to make sure that you get it in writing from them that the lump sum is a full & final settlement and that neither they nor anyone else will chase you for the debt and that your credit report will be marked as satisfied (if you need a template letter look on nationaldebtline website).

It could be worth writing to them to ask if they will consider freezing interest - but if you are in a better position financially now they may not be willing to do that (they are likely to ask for an income & expenditure statement) - again there is a template to request freezing interest on national debtline.

You are currently paying £100 per month, how much do you expect to be able to save in addition to this to go towards a lump sum settlement?

In the circumstance it sounds like it may make sense to save for a F&F settlement even with the interest but you need to consider the maths of how long it will take you to save up the settlement figure compared to the interest you will be being charged in the meantime, and how much less that would be if you made extra payments to the debt.

Be careful of increasing your repayments to a level that leaves you with no leeway financially as you could end up having to ask them to decrease them again which is not always easy.

Beakatron

Thanks for the advice Tixy. I'm hoping to have saved this by about April next year. I'm due a couple of large bonuses from work so these will go towards it and then I'll be saving as much as I can each month.