Advice on paying things off!

Lorne · 22 June 2006 at 10:11AM

Hi there,

I'm fairly new to this money saving thing having started in March 2006 and already a lot of the principles are making such a difference to my finances. I have an outstanding loan and car loan and have tightened my belt to put £340.00 aside monthly to go towards paying these off early.

If you are making extra payments to an account do you wait until you have a chunk to pay towards it or do I pay as I go?
Does the extra payment you make need to be the same as your monthly payment?

I've never been in the position of having money to put towards a balance before so this is all new to me, advice is appreciated.

Loving the sandwich pig idea, I can't believe how much I'm saving just by making sandwiches before I go to work.

Thanks, Lorna

PONDSAVER_2 · 22 June 2006 at 10:18AM

You need to find out from your loan people if you can make overpayments or not - some like mine will not accept overpayments they will only accept a lump sum in full settlement of the loan so in that case you are best saving the money in a high interest account until you have enough to pay off the loan.

Well done for finding spare money to pay these things off though money saving really does make a difference.

jesster_2 · 22 June 2006 at 10:21AM

Hi Lorna, and welcome!

Provided you're allowed to make overpayments on your loans, the key to deciding whether to make them as you go along or whether to save them up into a chunk and then pay it, is the interest you're paying on the debt compared to the interest you'd earn on the savings. If you're paying, say 7% interest on your loan but would only earn 4% on the savings, then it makes sense to hammer the debt as much as possible.

On the other hand, if your debt is on a 0% card and you will be able to pay it all off before 0% runs out, then it makes sense to put the extra money each month into an account where it'll make you some pennies, and then get it out to pay off the card once you have enough, and before you start paying interest.

In your case, it'll probably make sense to pay what you can, when you can - provided you're allowed to make overpayments.

Lorne · 22 June 2006 at 10:22AM

Thanks, that is exactly what I'll do I'll contact them for advice about overpayments!

Sorry it seems really basic, but this is all a bit of a maze to me!

Lorne · 22 June 2006 at 10:24AM

Thanks Pondsaver and Jesster, advice is so much appreciated!

MrsTinks · 22 June 2006 at 10:29AM

I pay it as I can

that way I know exactly where I stand but I'm lucky and my loan can be over paid at any point I wish without me getting penalised. Now I just need to pay off the credit card before the 0% runs out

Some more E-baying me thinks