To pay or not to pay?

viv0147

Advice needed
I have two loans totalling £24000 I am now in the position to pay the loans off which will leave me with £9000 in the bank.

I am moving to Ireland in 12 months time so I am wondering if by paying the monthly amount for 12 months and then clearing the final balance would be better, as I could earn more interest on a balance of £33,000?

The payments of the loans are £340 and £88. I can afford to pay £188 out of my wages but would need to pay the extra £240 out of my savings for the next 12 months.

Would this mean a bigger balance in 12 months time if I do it this way and use ISA’s and high interest savings?

Any advice you could give would be much appreciated.

Thanks

mrcow

It all depends on the rates that you are paying.

Have you had settlement figures on the loans?

If so, how much were they?
What APRs are you paying on each of the loans?
And lastly, what's the interest rate that you'd earn on your savings (minus tax of course!).

viv0147

The settlement figures are 24,000 give or take a few quid. The rates are 6.5% and the savings account is tax free 5.15% with the post office ( £30,000 15 each with my partner and £3000 in an isa )

Thanks

mrcow

So just looking at the figures, your loan interest rate is higher than your savings interest rate.....

So it's a matter of a few hundred pounds, but you'd be better off paying off the loans.

I'm trying to work the rough maths on it to give you some figures, but I've lost my calc table. I'll see if I can find it......

mrcow

It looks as if the difference is between £250 and £300 (although I'm sure someone cleverer can come along and give an exact figure). It's difficult without knowing the loan period left (although from your figures, there would appear to be about 55 months left? which is what I've based the figures on).

Also, REMEMBER (!) the surplus that you were going to take out of your salary to repay the loans can now go straight into our savings instead!


Edit: Freudian slip.....of course I meant YOUR savings lol..............

viv0147

Thank you for your advice I am still not sure what to do but I will take on board you advice so thanks again.

kuohu

Another vote from me for Pay.

southernscouser

Have a look at this. Might help you decide.

increasedmiles

Definintely pay them off! Rates on loans are normally higher than savings. If you'd like to find out more about being canny with money I have read a book, which I think was called 'Rich Dad, Poor Dad' and it talks in there about always paying off your debts before saving - it makes sense!!
If you have loans then the tempation of having that money around could prove difficult to resist and you may end up dipping into your funds and not being able to pay off your balances as planned.