Please could I have some advice re paying off a loan?

ANewEra

Hi, bit of a long one, but would really appreciate some advice from people with more experience than me on this.

My OH has 4 loans, they are all up to date and no missed payments.
Not 100% sure of APR's etc at the moment, but in brief here they stand:
Northern Rock 290pcm 5.5 years left
Barclays 232pcm 5 years left
Black Horse 120pcm 3.5 years left
Citi Financial 120pcm 1 year

The BH one has a settlement figure of £2700 (give or take a few quid)
which I have almost enough in savings (£2600) so we can pay this off. If we did that, the 120pcm that he pays towards the CF one could finish that in less than 6 months too. Then can start saving again.

Obviously the amount I have saved would not make a dent in the 2 big ones, but I wondered if this plan for the smaller ones was worth doing?
If it was a CC I wouldnt hesitate to pay it off as the debt just gets bigger, but as they are all personal loans (accrued from his previous marriage, but unfortunatley only in his name) then we do not really 'save' anything by paying off early.

He has already paid off 3 CC he had, closed two acc, but kept one as 'emergencies' and has lowered the limit on it - I have read some good advice on this site!

The idea came about really as we are expecting a child in December, my credit score is shot to pieces as I filed for backruptcy in 2008 and got ED in June09. And we would like his file to be tidyed up as much as we can as we will no doubt need to move in the next few months. Plus, want as little debt and outgoings as possible.
Just slightly unsure as to whether the 'no savings left' versus the 'small debts gone' idea is good or not?

Without posting up a full SOA - which would be a bit of a pain as we keep our finances pretty separate, in short, we (he) can afford the repayments as they are, it does leave us - after everything is budgeted for - about £100pcm 'spare' which if we do move will be taken up by the extra rent/need to buy white goods (possibly) deposit etc, so until we get the savings back on track we won't really have much of a fall back if something does crop up, but it should be only about 5-6 months.

All ideas welcome!! and thanks in advance.

ANewEra

To add to the above, he has just called Citi Financial and the settlement is about £1300, slightly more than we though, however, it turns out there is about £850 worth of PPI on it, which he is going to try and claim back as he would never have agreed to so can only assume it was added on without his consent or even telling him, that should almost finish that one off bar a few hundred pounds.
Not sure how quick these PPI claims can be, but hopefully can finish that loan off in a matter of months now.

MrsTinks

2 schools of thought on this one... the BH loan you say has 3.5 years to run... so that's 12months x 3.5 years = 40 months if I'm not much mistaken... £120 monthly payments x 40= £4800 and you say the settlement figure is £2700 (ish)... so... by paying off now you save £2100??? You sure that settlement figure is right because if is...

The OTHER school of thought is... have you done an SOA for when you go on maternity leave? Because if you are going to struggle then you'd be better off keeping some savings aside...

ANewEra

Thanks for the reply Mrs Tine,

The actuall monthly payments are £112 (we just call it £120 so we know it's covered) and the last time we looked at it it had 3.5 years to run - might be closer to 3 now, but when OH rang them this morning thats the settlement figure they gave him. But your right, it didnt add up, have told him to get them to give it in writing too.

As for the SOA on mat leave, no we haven't, worth a look at, however, at the moment I have one child which we are paying child care for which I will be lokoing after when on leave so there is some leaway there.

MrsTinks

Ok so the difference is £1332 - still a bit of a chunk... do check that there aren't any penalties for repaying early btw

Happytogetdebtfree

I dont know what i would do, if the settlement figure is right id pay it off because id be saving a bit there, but the other school of thought is its nice to have some savings for the upcoming maternity, mind you depends on the aprs .... etc good luck xx

ANewEra

Having spoken to OH again, it transpires this was the settlement figure the automated telephone service gave him.
It is actually about 2.5 years @ 112pcm, so still getting about £600 ish off it. Have told him to speak to a proper person and make sure it would be a F+F settlement and that the account be marked as satisfied, don't want this to come back and bite us on the bum later.

I do see the point about having some savings to fall back on when on Maternity leave, thats why I'm not 100% sure, but knowing there's a saving to be made on the loan it's making me want to get rid of it even more. Knowing it will free up some money monthly too.

Going to have to look at the PPI thing on the other one too. Thats tonights mission.

Happytogetdebtfree

Yes definatley reclaim ppi if you can ....

DVardysShadow

Not totally certain, I am a bit bemused by PPI and settlement figures, but it looks good to me to do as you plan if it cuts the interest you pay.

As it stands you are going to have 120/month extra free in a year and 240/month in 3.5 years. But with your plan, you lose 2600 and get 240 extra free in 6 months. 11 months after that, the 240 would have built up to 2640 - so it is 2 loans gone and back to where you were in 18 months, but with 240/month extra free.

ANewEra

What is wrong with Black Horse!?!?!

He has just spoken to a person, who told him that the outstanding balance was £2652.09 but the settlement figure is £2735.10, so in essence they want an extra £80 ish to settle early, and none of it adds up to to the monthly payments of £112.

Now I'm reluctant to settle this early, as whats the point! Other than clearing another thing off his credit file.

Thanks for the replys so far, it's probably confusing as the story keeps changing, I have a feeling if we speak to them again it will be different once again......grrrrr bl00dy finance things......

JimmyTheWig

ANewEra wrote: »

My OH has 4 loans
my credit score is shot to pieces
we are expecting a child in December

Unless you have proven to yourselves beyond reasonable doubt that you can survive the costs of this baby whilst on maternity leave, I would say no don't do it.
If you use your savings to pay off the loan, what are you going to do if you run in to serious problems? With both of your credit histories you may struggle to get credit in today's climate.

Do your budget / SOA before you do anything else...