Can I make £1,024 in 11 weeks from nothing?

jet77

How do you quote someones post?

jet77

OMG - I just did the mortgage calculator and if I did manage to pay off 500 extra a month off my mortgage it would save me 57242.79 in interest and I would be Mortgage Free in just 9 years!!!!

Annie021063

jpet77 wrote:

I wasn't planning on the challenge money being all Money For Nothing - just 'extra' money that you have managed to gain on top of your usual income to clear your debts. What do people think?


Luv Jxxx

Thats fine jpet - we could say money from anywhere as long as it's not a usual income - i.e. extra jobs, windfalls, gambling etc etc
I'm happy with that.
Well done on your crash money - what a nice bonus
Speak soon
Annie

jet77

Sorry - me again - won't the inland revenue want to take away WFTC and CTC because of the extra money that we're managing to scrape together?

finallydebtfree!!

Anyway, back to this challenge - it's the last day tomorrow for all those who started at the begining of the thread so I think it would be lovely to see how we've all done. Are you posting an update this week finallydebtfree? If you haven't got time I'm happy to do it?

not feeling to great today so if you want to give it a go J go ahead, feel free to copy and paste last weeks update and alter it if you like.
Ive been so busy with work lately havent had chance to attempt anything.

jet77

I'm quite happy to do an update this week - if you want to be included please pm your total through and I will post it tonight (Mondays are too hectic for me)

sweetgurl

has emily reached her target yet?

EagerLearner

Hi all - £3k in 3 monhts too much for me also - so I'd to the 11 week challenge again, or the tiered system suggested (maybe each 'tier' would have it's own post and we could join whichever post we feel suits each person best?

Annie_Fanny

Dan29 wrote:

A mini cash ISA would be perfect. As you can put £3000 in per tax year (6 April - 5 April), you could put your £4500 in with no problems. NS&I have an ISA at 5.55%.

Dan29 - I am really bad with maths. I know it makes sense for Annie to put the money in an isa but how much interest would it be approximately?

Please help me understand the maths!

Annie
Xx

kathfisch

Annie_Fanny wrote:

Dan29 - I am really bad with maths. I know it makes sense for Annie to put the money in an isa but how much interest would it be approximately?

Please help me understand the maths!

Annie
Xx

If she got her loan (£4500 I think she said) in 3 installments of £1500 in September, January and April.

Ignoring interest on previous student loan balance etc and assuming the loan interest rate is 3% (0.25% per month), the loan balance would be:

£1500 in September
£1503.75 in October (£3.75 interest)
£1507.51 in November (£3.76 interest)
£1511.28 in December (£3.77 interest)
£3015.01 in January (£3.78 interest and £1500 loan payment)
£3022.55 in February (£7.54 interest)
£3030.15 in March (£7.60 interest)
£4537.73 in April (£7.58 interest ok, maybe I'm pennies out there and £1500 payment)
£4549.07 in May (£11.34 interest)
£4560.44 in June (£11.37 interest)
£4571.84 in July (£11.40 interest)

If she were to put all of her loan into an ISA paying 5.5% (0.458% monthly) the ISA balance would go like this:

£1500 in September
£1506.87 in October (£6.87 interest)
£1513.77 in November (£6.90 interest)
£1520.70 in December (£6.93 interest)
£3027.67 in January (£6.97 interest and £1500 payment)
£3041.54 in February (£13.87 interest)
£3055.47 in March (£13.93 interest)
£4569.46 in April (£13.99 interest)
£4590.39 in May (£20.93 interest)
£4611.42 in June (£21.03 interest)
£4632.54 in July (£21.12 interest)

That's all assuming payments being made exactly at beginnings of months etc etc, but its pretty close I hope. And assuming that student loan interest is calculated and paid monthly on a compound basis - if not the interest on the loan would be less.

So... she would be £60.70 better off by July. That is a very conservative estimate though as this shows you that the interest rate on student loans is not always as high as 3%, not in recent years anyway. Of course, there's no guarantee that the interest rate on savings will stay as high as 5.5% but, in the unlikely event that the two interest rates were getting so close to each other as to make it hardly worth it (I'm not an economist, I don't know if this would ever happen) then the money is sitting waiting in the ISA and the loan can be paid off straight away.

The beauty of this, of course, is that the money will carry on working for you for years to come. That £60 is just the tip of the iceberg, the gap between interest earned and paid will keep getting bigger.

There is no financially rational reason for paying any more off the student loan than you have to, the only argument that holds water (it seems to me) is that all that money sitting there is a temptation and if you might spend it on something else then the benefit is gone! But... if you will use it for something that you would have otherwise taken out a loan for (something essential of course ) then 3% or thereabouts is cheaper than any personal loan you're going to get!

Hope that helps!

Kath x