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Pay Loan Off or Keep money in Savings
darkcloudi
Posts: 582 Forumite
in Loans
I have a Car Loan with the AA since September 2004. Loan ends October 2007as there was a payment holiday. Interest was at 6.6% fixed throughout the loan. Monthly payments are £342.
However I have made additional repayments during that time so that I can pay off the loan quicker.
I am hoping to clear the loan in January 2007 with a final payment of £2600 as this will be the balance remaining since making these additional payments.
My question is should I be better off keeping this money in a bank to acrue interest or as I want to fund a property should I pay the loan off so it will help when applying for a mortgage.
If I took the first option (keep the money in a bank) Do you think I can tell the AA I want to reduce the payments to £260 a month (from £342) considering the loan should be cleared off in Oct 2007 and I have paid these additional payments to help clear it off sooner? I can afford the repayments at present but if I was to take out a mortgage and pay the loan at the same time it may take a big hit on my outstanding income.
However I have made additional repayments during that time so that I can pay off the loan quicker.
I am hoping to clear the loan in January 2007 with a final payment of £2600 as this will be the balance remaining since making these additional payments.
My question is should I be better off keeping this money in a bank to acrue interest or as I want to fund a property should I pay the loan off so it will help when applying for a mortgage.
If I took the first option (keep the money in a bank) Do you think I can tell the AA I want to reduce the payments to £260 a month (from £342) considering the loan should be cleared off in Oct 2007 and I have paid these additional payments to help clear it off sooner? I can afford the repayments at present but if I was to take out a mortgage and pay the loan at the same time it may take a big hit on my outstanding income.
0
Comments
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Pay the loan off, without a doubt. 6.6% is a pretty good rate for a loan, but you'd be paying more interest in keeping the loan than you would make by having the cash in savings for 9 months.
By paying off the loan you'll have one less outgoing to worry about and can put what you would have been paying (£260) into savings which would be more beneficial for you than having savings and a loan when it comes to mortgage applications.0 -
Thanks Jazzking for your response.
Sorry - I should stated as it was a Car loan for over 3 years the interest has already been paid on the total amount taken.
Any additional payments I make does not help reducing the interest that I have already paid. This is why I am not sure whether it would benefit in anyway to pay off the loan sooner.0 -
I'd pay the loan off.
I would rather have more cash flow (with the possibilty of saving all of it) every month. (i.e, the payment money).0
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