How best to repay HSBC loan- help please

minx1985

Hi all

I have been a "lurker" for some time and your ideas and mutual support has been great to read, so thought I'd take the plunge and get involved myself.

Here's my story: I have a £11440 loan with HSBC which I'm repaying at £432.11 a month, due to finish December
2014 but i want it gone sooner! I am in a fortunate position where I can overpay £200-280 per month dependent on how frugal I'm feeling. My question is: do I overpay as I go along or do I stick the extra money in an ISA (HSBC e-ISA at 1.74% AER) then repay a lump sum when I ask for a settlement figure? My gut is to pay as I go but what with HSBC paying a rebate on interest and allowing overpayments I'm not sure which way to go- get a little bit of interest on this extra money or just chuck as much spare cash as possible at the loan as I go along and hope for a decent rebate at the end. Any ideas?

SusieT

I would put some away in a savings account so you have perhaps £500 as an emergency fund that could also be used to pay down the loan if you wanted to and then put the extra to the loan each month. If you put money into a saving account you will get somethingg like 0.5% interest but if you put it in the loan account you will save the loan rate of interest 15% or whatever it is. The earlier you do repayments the more interest you will save over the life of the loan so its financially better sense to put it to the loan early.

minx1985

Thanks Susie, an emergency fund sounds like a plan, especially as an emergency would mean dipping into my overdraft... just wasn't sure if the extra repayments would make a huge difference in the settlement figure HSBC would provide (call centre worker wouldn't give me hypothetical answers) or if squirrelling away the extra would accrue some interest on the ISA savings, where there are no penalties for withdrawal so I could save my tax free allowance, dip into it in an emergency, reinvest it next tax year then use the lump sum to pay them off April 2014. Anyone had a similar experience with repaying a HSBC loan and what sort of rebates were you getting?

Happytogetdebtfree

if you pay an extra £200 on top of loan payment its cleared in 19 months the 19th month been a reduced payment of £64 but then i dont know him much intrest you would save so it may be quicker time, if you pay the loan with an extra 280 pm thats 16 months, its all motivation . Good luck with your journey x

minx1985

Indeed it is! Just hoping for a nice surprise in terms of a rebate. Realistically I will be looking at an extra £220/month otherwise I would literally have no social life (moved to new town, work alone, odd neighbours) and quite possibly go stark raving mad!!

Boris_Allen

The only reasons not to pay off the loan as quickly as possible are:
(a) you want to put some savings aside in case of an emergency
(b) you have other debts with higher interest rates which you should be focussed on paying off first

minx1985

The loan was to consolidate my other debts so it is the only one I have to service (other than student loan but the less said about that the better! ) :eek:
Seems to be a theme here about an emergency fund... Shall start putting a bit away, but what would people suggest- a couple of hundred? 1/3/6 months salary??

wildingb

Save about 500 pounds as an emergency fund. Then pay off the HSBC loan as fast as possible. Then save a 3-6 month living expenses fund. Although some people would suggest paying off the student loan as fast as possible before saving the 3-6 month fund.
You are doing really well if you can put 200 extra a month towards the loan.

minx1985

Thank you wildingb, it's taken a lot of discipline, eBay selling, a strict budget and stockpiling supermarket deals to get it under control and free up some cash. Just want this debt gone! Done my research and it's better to leave the student loan as it's under control at £92/month from gross salary- secretly hoping it'll get written off but a lottery win is probably more likely! :rotfl:

minx1985

Morning all.

Has anyone else out there repaid a HSBC loan early? What was your experience?