should i save or overpay off loan?

missmental

Hi,

I have a Sainsbury's loan with 5 years to go. The balance is £17,000 and my payments have been reduced to £278 per month since I cancelled my PPI.

I have been sucessful in reclaiming some PPI and planned to pay about £4,000 off the loan and then overpay each month, paying £800 per month. This should mean I would be debt free by Sept 2011!

However, I've spoken to Sainsbury's who informed me that I will not make any savings by paying my loan off early unless i paid it off in full. They recommend that I should put my extra money in savings and then pay off in full.

I am really disapponted, in my mind I wanted to pay it off early and be debt free.

Any advice greatly appreciated, I am really unsure what to do now!!

Thanks, Heather.

CLAPTON

if that is what they say and your T&Cs confirm that you don't gain by overpayments then it's a no brainer
just save as much as possible in a saving a/c until you have enough to make an early settlement (which will save you interest)

missmental

Thanks,:T

I just wanted to be debt free!!

I have never been debt free!

Tixy

Only other thing you might want to consider (and it will depend on various things including your credit history and amount of debts etc) is if you are paying a very high APR on the sainsburys loan then you could consider if it would be worth applying for a new loan at a lower APR and for £4000 less. The new loan could also be taken over a much shorter period (maybe 2-3years?). Then you could use your £4k and the new loan to pay off the sainburys loan in full.

It will only be worth while if you would get a much lower APR and are certain that you can keep up with much higher monthly repayments. Plus you would need to get a settlement figure from sainsburys to see how much they penalise you for paying off the loan early.

Just something to think about anyway.

Good luck with getting debt free.

missmental

Thanks,

i'm only paying 7.6% anyway, so not really worth swopping.

I will look at some savings accounts or paying extra to mortgage?!