Save or not to save?

lisyloo

Right I am assuming 36 months and that you can get a tax free savings rate of 3%.
Please clarify these figures.

If you continue paying the loan and put 3988 in the bank you would end up with

4107.64 4230.87 4357.8
Shown yearly

If you were to pay the loan and save £120 per month you would end up with (shown monthly)

120.3 240.9 361.8 483.01 604.52 726.33 848.44 970.86 1093.59 1216.62 1339.97 1463.62 1587.57 1711.84 1836.42 1961.31 2086.52 2212.03 2337.86 2464.01 2590.47 2717.25 2844.34 2971.75 3099.48 3227.53 3355.9 3484.59 3613.6 3742.93 3872.59 4002.57 4132.88 4263.51 4394.47 4525.75
So you would end up with more in the second scenario.

Please clarify my assumptions in case it changes the answer.

Lewigreg081281

Yes if I carried on paying the loan at £120 it would end june 2013 therefore 37 months? I have been given a settlementt figure of £3988 and have 4k to do whatever with so I was thinking pay the loan off.

If I contine to pay the £120 a month that would be £4440 id pay until june 2013 which is when the loan would end. If I paid it now id pay the £3988 and that would be it therfore saving around £500

Does this sound ok?

Lewigreg081281

Yes if I carried on paying the loan at £120 it would end june 2013 therefore 37 months? I have been given a settlementt figure of £3988 and have 4k to do whatever with so I was thinking pay the loan off.

If I contine to pay the £120 a month that would be £4440 id pay until june 2013 which is when the loan would end. If I paid it now id pay the £3988 and that would be it therfore saving around £500

Does this sound ok?

lisyloo

Yes I think you are better off paying it now mathematically.
The only question is are you leaving yourself with enough to cope in an emergency e.g. car crash, job loss, sickness etc.

Lewigreg081281

Thanks it was money I didn't have so was just after the best option. Sods law though like you say my car is now starting to rattle from the rear ;-( I'm going to get the loan paid off though then open a savings account going forward is the AA one the best? I will be looking at around £300 to £400 a month that I will be saving but I will need the option of accessing the money in emergancy.

Thanks

lisyloo

If you are a tax payer then you might be better off opening an ISA.
Other accounts will take (probably) 20% of your interest in income tax.
I'm assuming you pay basic rate tax and not 0% or 40%.
That's an assumption on my part.