Use ISA to pay off loan?

LowRob

Hello
This is my first message on this site, and I'm hoping someone will be able to help me!
I have a graduate student loan with 13 repayments left of £226.92 a month. If I were to pay it back today the total repayment would be £2785.19, saving £160 off the total owed if I pay back via 13 repayments.
I also have £3793.11 in an ISA account and I'm considering using this account to pay off this loan 'today'.
The problem is, if I use this ISA I will 'only' have the remaining £1000 as savings, and do you know what, I've NEVER had saving in my life before!!
So, what would you do?
I have a few bills coming that I know about but they can come out of my current account.
I also have an 8% regular saver account as I'm saving up for a new car.
Look forward to your replies

rog2

Pay it off! As you say, you will still have £1,000 'savings' and perhaps you can add to this by putting in the amount that you were paying off on the loan every month. It won't matter then if you miss the odd payment.

moozie_2

I agree with rog. If you pay the loan off not only you will be saving £164 in the long run but you can also carry on paying the £226 in the ISA or 8% saver and build up your savings again very quickly.

Well done on having a very sensible approach to money! :T

david_hellier

I would clear the debt and keep your savings. Take advantage of your new situation by doing a budget and stick to it; avoid credit cards and any further loans, cancel your overdraft facility and enjoy life.

Good luck.

CLAPTON

2785 invested over 13 months at say 5% on a decreasing amount (i.e. paying off you loan on a monthly basis ) would earn you approximately £75

so it seems best financially to pay the loan off as you save 160 and lose only 75 interest. Also of course you will now have an extra 226 per month to save which i haven't included as a benefit.

lynzpower

SOunds like a great idea to me

Plus as Clapton says if you can afford to you can put that 226 into your regular saver @ £8, and you will have made the savings back in no time!

debbycatz

I agree with the other posters - use your savings to pay off the loan - you know it makes sense

I used my Standard Life windfall to pay off my credit card and it did gut me doing it in a way 'cos it would have been so nice to have £1,000 to spend as I wanted but I knew it made sense to clear my debts.

Also, if you have never had savings before then the £1,000 it will leave you will still feel great

LowRob

Well, I've done it!!
Used £1000 of current account and £1785 of ISA to pay off loan.
I've also set up standing orders for the extra £200 I won't have to pay back on the loan - another £100 to the 8% saver and £100 to my ISA