Debt/Saving question

maskerade

Hi everyone,
I’m currently personal debt free but I have a car loan at quite a high APR. I also have £5k in an ISA as I was made redundant and got a tax free payment (hence the new car, my new job is much further and my old rust bucket wasn’t going to last much longer).

Normally I’d pay the car loan off without hesitation as it’d save me around £2k interest but I have a query this time. I’m going to move in with my partner in 2013 when he sells his 1 bed flat and buys a house (his 1 bed flat is in an exclusive area and he can get a 3 bed house for about the same amount where we want to move to). He’s paid six years of his 25 year mortgage off and his parents helped him put down quite a chunky deposit so I don’t think getting a new place should be a problem for him in terms of having the right deposit in equity. Should I keep the cash to help with the house move? I’ve spent the last five years paying off personal debt so on my own I don’t think I’d be looking at buying a house on my own for at least 3 or 4 years so I have no hope of matching him in equity stakes. I have never bought or sold a house so I don’t know if it’d be better for adding me to the mortgage (so my income counts too) for me to have no debt or for me to have secured debt and a bit of cash?

My car loan payments are £180pm and I have a good excess from my salary after all my rent etc so I should be able to save a couple more grand before we move in.
Thanks in advance J

knoxvillain

personally I'd pay it off and continue saving with the excess wages but thats just my opinion.

rosiesposies

depends. If your credit file is good them yes your income can boost your mortgage capacity. if not you will hinder.
you can always contribute the savings towards the deposit and have a deed of trust written up for hte percentage you would own iwth your 5 k (and its worth doing this if you are going to move in if you arent married)

mildredalien

So if you pay off your car loan with savings you'll have an extra £180 a month plus some more surplus to save up over the next year? That will be a good chunk of savings to help as well as saving yourself £2k in the long run. Sounds like a pretty good idea to me!

maskerade

Thanks everyone, I'm going to have a chat to my partner tonight but I think it's probably best to pay it off as it's so much interest!

Having paid off all my personal debt I'm a bit terrified of having some more so I just don't want that fear to sway my decision

mildredalien

Isn't a car loan personal debt??

rising_from_the_ashes

mildredalien wrote: »

Isn't a car loan personal debt??

Have to agree .....


maskerade - I'd agree paying it off makes sense if you can - you could set up a SO to a savings account for the £180 and it'd mount up fairly quickly (just think of it as a d/debit for the car loan so you're not tempted to use it for something else - that's my trick )