FTB - Please Advice

rasnii

Hi all,

We are looking into buying a house later this year and have been saving towards that for the deposit. At the moment saving £1k a month and currently have £33k saved.

We have also been paying off a bank loan which currently has £5,688 left to be paid off (@ £376 for next 15 months.

What we would like to know is, will it be better to pay off the loan using some of the savings (can only be paid off in one lump sum) or should we just continue paying the loan as we have been doing and put the £1k away every month.

Thanks.

Pincher

Assuming it's a personal loan at 8%, the interest will be £400 ish. If you paid it off now, the loss of interest at 2% is £60 ish.

If you already have a good credit history, pay it off now, and be £340 ahead, otherwise you might keep it going to build up you credit record. If there is an early repayment penalty, it reduces the gain.

itsakidsworld

Ask the bank what is the total cost if you were to pay the loan off by the end of this month including all their redemption fees. If it is less than £5688 then look at paying it off as you will make a saving.

If the figures are very little and it would be a good option to check anyway, find out if it will affect your credit rating by paying it off early.

VIGILANT22

itsakidsworld wrote: »

Ask the bank what is the total cost if you were to pay the loan off by the end of this month including all their redemption fees. If it is less than £5688 then look at paying it off as you will make a saving.

If the figures are very little and it would be a good option to check anyway, find out if it will affect your credit rating by paying it off early.

Quote find out if it will affect your credit rating by paying it off early?????....Are you suggesting it would!!!

itsakidsworld

I don't know if it would affect their credit rating which is why I asked them to find out first. The way this crazy country works it would not surprise me one bit if this did affect their credit rating. I have heard somewhere(probably pub talk!) that it does affect your rating, however I am not certain so merely asked the question. It is better to ask and find out all the answers before making a move.

Son_of_a_beesting

Not a silly question at all, it would be unwise not to ask the question.

VIGILANT22

itsakidsworld wrote: »

I don't know if it would affect their credit rating which is why I asked them to find out first. The way this crazy country works it would not surprise me one bit if this did affect their credit rating. I have heard somewhere(probably pub talk!) that it does affect your rating, however I am not certain so merely asked the question. It is better to ask and find out all the answers before making a move.

No as long as you enter into dialogue with them about what is involved in paying the loan of early ie any penalties for this etc, paying a loan off early will not affect you credit score....It is non payment which affects your credit score....

itsakidsworld

Well done for clearing that up for everyone. If you knew the answer why didn't you just post that in the first place.

VIGILANT22

itsakidsworld wrote: »

Well done for clearing that up for everyone. If you knew the answer why didn't you just post that in the first place.

I could ask the same of you, if you didn't know why did you post it in the first place!.....

rasnii

itsakidsworld wrote: »

Ask the bank what is the total cost if you were to pay the loan off by the end of this month including all their redemption fees. If it is less than £5688 then look at paying it off as you will make a saving.

If the figures are very little and it would be a good option to check anyway, find out if it will affect your credit rating by paying it off early.

Have found out from bank if we were to pay off the loan today total amount willl be £5740 including charges.

So which of this two scenarios would give us an advantage when we go for a mortgage later in the year.

1. Having about £6k deposit less but no bank loan being paid @£376pm

2. Paying off the loan @ £376pm as we are currently, but with about £6k deposit more.

Thanks for all the inputs so far.

Idiophreak

No brainer for me, assuming you've a decent rating

- just keep paying the loan over the 15 months. The 8% you pay on that will be much less than the interest you'll pay on £6kmore on the mortgage.

If you're saving £1k/month, it doesn't sound like it will effect your ability to repay, affordability criteria etc.

Ignore dumb and dumber squabbling above (they can fight it out for which is which). In answer to their general ramblings, your credit score would be improved *now* by having less outstanding debt, but longer term, having repaid more payments successfully, it will be better to pay it over the term.

You *can* build your score as well as ruin it - you don't start off with a perfect score.