Trying to pay my loans off faster.

sarah0404

Hello, I'm a Debt-Free-Wannabe! I'm currently paying £400 to my two credit cards. They should be cleared by March 07! :j I also have 2 loans which I'm paying at the moment. After I've cleared the credit cards I want to concentrate on the loans. One is with the AA for about £5000 (maybe a bit less now) and the other is with RBS for around £22,000 :eek: By March 2007 the amounts will (hopefully!) be a bit lower.

As far as I'm aware I can't make over payments on either of them, so I was wondering what would be the best way to pay them off. I was thinking either:

A) Save the £400 in a savings account every month till I have enough to pay them off.

Refinancing them both into one loan and making monthly payments of £800. (that would pay them off in around 3 years)

I'm not sure what to do for the best. I want to pay them off as quickly as possible and pay as little interest as possible.

Hope someone can help!

sweetmoneysaver

It all depends on the interest rates really and what the penalty is (if there is one) if you pay off the loans early in full. Also check whether you can overpay or not.

Get the most expensive rate of interest credit card sorted first but obviously keeping up at least the minimum payment on the other credit card and the loan payments.

If you put the £400 a month in a savings account the chances are that the interest you will get will not be as great as the interest on the loans. Therefore it may be best to get them paid off if you can raise a cheaper loan for the amount of the original two. Check out Martin's articles on loan rates or somewhere like moneysupermarket, but definitely get some info about the terms of your current loans.

Good luck!

Warriorsith

I'd personally would repay the smaller loan off first by sending them a cheque of the £400 as extra per month to help clear it, I'm currently repaying a Dell finaince loan back at more then I should each month and will have it cleared by July 06 instead of March 07 they haven't said anything to me but I just want it out the way so I can concentrate on other matters so if I get a 'penalty charge' then I want mind paying it but that's me.

I'd check with both companies to see if you'll get a 'penalty' for paying extra each month and then decide from there as it's you whose repaying the money back and either way do check the Loan advice page as suggested above and Good Luck in clearing your loans.