When to pay off loan...

jessieja

Summary of situation (figures are approx):

Mum took out loan for 18k plus 4k ppi, total 22k. Has been paying £264 pm (inc ppi of £44) for approx 5 years.

Asked for settlement figure last month- quoted 13k

Since then her employer has gone into administration, hence ppi should kick in. She is currently awaiting redundancy notice.

Is it better to let ppi pay off loan for 12 months and then pay off amount owing, or should she not bother to claim on ppi and pay off the 13k now?

For a novice such as me, it seems like a no-brainer- get the payments paid for 12 months, hence debt reduces, get new final settlement figure in 12 months, which will be lower than it is now, pay off final amount.

Or is there something obvious that I am completely missing? (It does seem too simple!)

Eric_Pisch

your logic sounds reasonable assuming the PPI pays of interest and principle if its interest only you will gain nothing

that your mother is not going to be working over the next 12 months

Xbigman

First, keep up payments whilst any PPI claim is ongoing.
Second, is your mum looking for another job? If so then the PPI would stop.
Third. Will she claim benefits? If so then having 13k in the bank 'may' cause problems. If she goes this route then you need to look at this more closely.
Fourth. Look at two options for the PPI.
Is there any chance it was missold? If so then the smart move might be not to claim but go for a refund under misselling.
Alternatively check to see if she might get a partial refund of PPI if you pay off the loan early. That might work out to be more valuable than the interest saving.
Regards



X

jessieja

not looking for another job, the money isnt in the bank- it'd be raised from a mortgage, claiming state pension, was possibly/probably missold, but amount paid out so far would pretty much equal a 12 month payout, so a straightforward policy claim, if it goes through, would seem the easiest option. It would be ideal if they'd reduce the settlement figure and avoid the 12 months payments- wonder if they'd go for that.

Thanks!

aj2703

Let the PPI pay off the loan, otherwise what is the point of ppi....? i have one with A+L which i am claiming on and it pays the monthly amounts over a period of upto 18 months. I was made redundant in July with only a year left on it, so if i can't find a job before July next year in effect the insurance will clear my loan.