Loan help :)

vectra90

Hi all I'm after some advice and personal opinions.

I took out at 3K loan last year to do some courses I needed to do for a new job, it paid off and I got the job.

I took it out over 7 years to get the lowest monthly payments as i was taking a risk as I wasnt guaranted the job.

I pay £78 a month.

Now ive got the job and got some money behind me i want to get rid of this loan. I've rung up and been told I can over pay what ever I want but will end up paying over 6K or a settlement of £3168.

Is it a clever idea to take out a 2k loan and use my saved up 1k to pay this off and get the 2k loan at a higer monthly payment and get rid of it in 2 years? or something along the lines of that, im not sure the best thing to do

bigadaj

Most loans should be able to be paid off with a couple of months penalty, who is the loan with. If you have to pay the interest over that term with no reduction then you're better of sticking to your current payments.

The last part of your post is difficult to follow but taking our loans to pay off loans is rarely wise.

Your current loan seems expensive do you k ow what the apr is?

vectra90

It's with Halifax, I can't remember off the top of my head the APR.

I dont want to be paying it off for the next 7 years, I can afford to be paying more than £78 a month but dont have the £3168 upfront to clear it.

I was thinking off taking another loan, in the hope that by shortening the loan period and paying a higher monthly amount, I wouldn't end up paying over double the loan in interest over the next 7 years. Is that right? does it work like that?

Thanks.

R_P_W

If you take out a loan to pay off another loan you are effectively paying interest on top of interest. However, if it works out less cost than what you would end up paying over the 7 years then it might be worth a look.

Unfortunately this is one of the down sides of personal fixed term loans - you either pay it all off or nothing - been in a similar situation myself.

Any chance your parents could help you out?

bargainbetty

Save really hard for as many months as it takes to get the repayment sum together, and then pay it off? If you have the disposable income to pay off a higher repayment/shorter term loan, why not save all that money towards it?

fozmcfc

bargainbetty wrote: »

Save really hard for as many months as it takes to get the repayment sum together, and then pay it off? If you have the disposable income to pay off a higher repayment/shorter term loan, why not save all that money towards it?

That's what I did with one of my Egg loans, basically saved hard until the settlement figure was less than what I saved.

Vectra, if you think it is going to be a year or more, than why not open up one of the easy access saving accounts, recommended on this site.

At the end you can withdraw the money without penalty, having made a few quid interest as well.

CLAPTON

find out the interest rate
it's absurb to give any advice without knowing that

CLAPTON

bigadaj wrote: »

Most loans should be able to be paid off with a couple of months penalty, who is the loan with. If you have to pay the interest over that term with no reduction then you're better of sticking to your current payments.

The last part of your post is difficult to follow but taking our loans to pay off loans is rarely wise.

Your current loan seems expensive do you k ow what the apr is?

it is illegal to provide unsecured loans that don't allow early settlement with appropriate interets rebate.

CLAPTON

R_P_W wrote: »

If you take out a loan to pay off another loan you are effectively paying interest on top of interest. However, if it works out less cost than what you would end up paying over the 7 years then it might be worth a look.

Unfortunately this is one of the down sides of personal fixed term loans - you either pay it all off or nothing - been in a similar situation myself.

Any chance your parents could help you out?

this is simply not so
you are not paying interest on top of interest; whatever does that mean?

R_P_W

the OP took out a £3k loan last year and pays £78 a month. Assuming it was 12 months ago @ £78 month means paid a total of £936 back to the loan company.

The settlement figure is still more than the total sum borrowed a year ago. So the least you can pay back is still more than was borrowed, so taking out another loan to pay the settlement figure you will borrow more than original loan.

Clapton - maybe I'm being a bit simplistic here but would that not mean you are paying interest twice?

CLAPTON

R_P_W wrote: »

the OP took out a £3k loan last year and pays £78 a month. Assuming it was 12 months ago @ £78 month means paid a total of £936 back to the loan company.

The settlement figure is still more than the total sum borrowed a year ago. So the least you can pay back is still more than was borrowed, so taking out another loan to pay the settlement figure you will borrow more than original loan.

Clapton - maybe I'm being a bit simplistic here but would that not mean you are paying interest twice?

we need the full facts

loan amount
apr
any fees
what type of loan (i.e. personal loan, secured)
any payment free months at the beginning (which won't be interet free)
number of payments required
number of payment already made.



the economy is paying early via another loan depends upon the numbers but this I would guess is a very expensive loan


in principle it is possible to accrue additional interest if there is a payment free period at the beginning of the loan or payment holiday and so I suppose you could describe this as interest on interest but that would be paid whatever you do.
The important part is that when comparing a new loan to pay off the old one, both both incur interest on interest except for any early payment penalty