Pay more vs leave it as it is?

natscat84

Reading everyone's stories on here, I feel like a bit silly asking this since in comparison to most, I have very little to get out of.

Currently I'm a student, with 3.5 more years of my course to go (but in the end I get to be a Dr so I can't complain).

At the moment I have just under £3k on a Natwest loan that I took out to fund my tuition fees because SLC screwed up my entitlement, a £300 balance on a Halifax CC (planning on getting rid of that when I get my next student loan payment) and my M&S card which I spend on and pay off in full every month because a) I get points which every couple of months earn enough for a little 'luxury' dinner for me and DH from M&S as a treat, since treats are few and far between right now and b) I care about my credit rating and don't want it to be shot just because I'm a student.
I also have an interest free £1400 student overdraft which I tend to go into towards the end of term but have never gone over.

As well as my student loan, I earn around £700 per month - £400 of that goes on my half of the rent and bills (husband pays his half) and £155 goes to paying off my Natwest Loan and the rest goes on food and everything else (car insurance, mobile etc).

Right now I'm doing OK and definitely keeping up OK with my financial commitments. I do, however, want to be debt free when I graduate, with a good enough credit rating to get a mortgage when I do. Natwest keep offering me various credit cards and loans, so I don't know whether it's best to try and refinance the loan so my payments are lower (thus I have more disposable income to put towards repayments) or throw more money towards it (which I'm loathed to do since my husband doesn't have a reliable income).

I don't even know if I'd get anything, being a student, even though I take home around £9-10k a year (£15 including student loan, but am also supporting husband whilst he looks for work)

Sooo.... experts. What can I do to make myself debt free quicker AND give myself a better credit rating, but without going into a big hole and not having any back-up savings. Or, if I'm doing OK, should I just keep doing what I'm doing.

Poosmate

Good question!

At the moment your only interst bearing debt is the £3k Nat West loan and your Halifax CC which you'll pay off when you get your next student loan payment right?

Does your student loan attract interest? If so what is it? And how much is your student loan?

Also what's the interest on your Nat West loan? Sorry forgot to ask, what's the term of this loan and how much longer to pay?

I have a cunning plan but will wait your response first.

Regards,

Poo

natscat84

Thanks Poo.

Student Loan is one of the modern loans - it does attract interest but I think it does so in line with inflation - I know for a time I was actually being charged 0% interest for a period due to the base rates. Haven't really paid much attention to that one, since it would just be deducted from my wages at source when I graduate - my bad!

Interest rate on loan is 19% (I took it out in 2009 when the interest rates were stupid because of the recession and it was the lowest they could offer me because I didn't think to take out an extra £2.5k which would have taken me into a lower interest bracket) and I have just over 2 years left to run on it (it was a 5 year term).

Really, I just want to be done ASAP and not have my credit rating trashed cos I do want to eventually be able to buy my own house instead of lining a landlord's pockets!

I await your cunning plan

Poosmate

Thanks for your reply.

Wow! 19% is whopping for a loan! I wouldn't entirely trust the bank even though they are offering you loans and credit cards. 2 years is not such a long time and I'm guessing (being very suspicious) that Nat West would love you to refinance so you end up paying over a longer period and even with a lower interest rate it couldcost more in the longrun.

I would only refinance with them on the same terms and conditions and over the same (remaining) period i.e. 2 years but at a much lower rate.

I'm just thinking if the interest on the loan was front loaded and you've paid the majority of it off so now will start to make inroads into the actual capital, maybe they want you to re-loan so they can sting you for more interest?

Read all of the smal print on these offers. Then read them again! lol

Part 1,

I was wondering, as your Halifax CC balance is so low, could you not pay it off using your student overdraft, saving a small amount of interest? Then the monthly payments you would have been using for that debt, you could stash in an ISA (though I guess that's only about £10pcm(?)).

Part 2,

IF you manage to refinance without ending up worse off in the long run, and your payments to Nat West are reduced, stash the difference in payments into the ISA too.

The End,

IF you were able to do both above, then maybe in 18 months time you have a little stash you could find out a settlement figure for the Nat West loan and maybe pay it off earlier saving even more interest. If you don't have enough in your stash, then could you use your 0% student overdraft to pay it off - maybe even a month or two earlier? You then, continue to pay your Nat West payments into your ISA till you have enough to pay off your student 0% overdraft.

It's a plan. Not sure if it would work without all the facts and figures.

Hope that's not too confusing, it's late and I need to get to bed so haven't proof read it! lol

Good luck,

Poo

natscat84

Thanks Poo!

The Halifax payments are currently at £11 per month - I know I'm being charged interest but at the same time, £300 is nearly a month's rent payment, so I'm loathed to pay it upfront now until I get more money. If hubby was working, I wouldn't worry about it and just do it.

You're right about the loan though - in the beginning, only something like £55 was going to pay off the loan, and the rest in interest. Now it's over £100 on the loan and much less on the interest.

Hubby has a job interview tomorrow. I'm crossing my fingers that he gets it since it'll mean I won't have to stash the savings and just chuck the spare at the loan to get it off faster!