Overpaying

12bdebt3

I am wondering if it is a good idea to overpay on my loan.

Current financial circumstances monthly:

Income:
Wage - £980

Expenditure:
Rent - £275
Gas - £20
Electric - £15
Water - £12.50
TV License - £12.50
Sky TV, Internet & Line Rental - £25
Council Tax - £40
Food - £100
Mobile Phone - £40
Loan Repayment - £190
Total - £730

Disposable Income - £250

I currently have an overdraft of around £1,000 which I am currently not paying interest on: My girlfriend puts her student loan in my bank account every 3 months to cover her half of the household bills. I am using a different current account for purchases. It's a joint account with my and my girlfriend, I limit myself to spending money in a month, leave the rest of the money in my other account to cover direct debits, and I use that spending money when I need to buy things. This month has been bad because I had to go to the dentist.

Next month I am planning to cut the total food bill by £50, from £200 to £150 a month. Which will save up £25 a month for me. In April when my tax code changes it will free up about £25 a month for me, which I will just put back on the food bill.

I am going to pay an extra £160 a month on my loan. This giving me just over £100 a month disposable income. I won't be able to pay my overdraft interest until after this loan debt is gone. I should be loan free by September if I do it this way, rather than next May.

Is this a good or bad idea?

andymc29

I over pay my loan on a regular basis. The main trouble is when you overpay and then find you're short on cash before your next pay day.

I'd recommend paying half of what you think you can afford and give it a few months to see how it goes.

12bdebt3

andymc29 wrote: »

I over pay my loan on a regular basis. The main trouble is when you overpay and then find you're short on cash before your next pay day.

I'd recommend paying half of what you think you can afford and give it a few months to see how it goes.

Thanks, the only problem with that is I won't be debt free before christmas. I want a few months in the lead up to christmas where I can save the money that I would normally pay on debts and buy some christmas presents and go into the new year debt free.

foxgloves

Something we have done in the past is not to overpay as such at the time, in case an emergency (i.e big car repair bill) rears its head & we end up having to borrow more to pay for it. So our method is to keep paying off the set monthly payments on the loan as normal, which means we know it's coming down. Then, the spare money, we save it up until it meets the decreasing loan figure somewhere in the middle, get a settlement figure & pay it off completely using what we put by.

12bdebt3

foxgloves wrote: »

Something we have done in the past is not to overpay as such at the time, in case an emergency (i.e big car repair bill) rears its head & we end up having to borrow more to pay for it. So our method is to keep paying off the set monthly payments on the loan as normal, which means we know it's coming down. Then, the spare money, we save it up until it meets the decreasing loan figure somewhere in the middle, get a settlement figure & pay it off completely using what we put by.

I have about £500 in savings just incase anything goes wrong. My loan settlement is £2600. I pay £190 a month. The extra payments will decrease the interest and there is no charge on them and I won't be inclined to pay them every month.