Should I pay off my loans?

BigEvs23

Hi everyone,

I'm looking for your thoughts on whether I should pay off my loans/ consolidate?

I have a personal loan with around £7,000 outstanding, with just under 4 years remaining. The APR is 8.9%. I'm repaying £178 per month.

My wife has a loan with around £4,300 outstanding, with just over 2 years remaining. Her APR is 10.4% and the repayment is £177 per month.

Between us, we have £10,500 sitting in a couple of savings accounts which are earning buttons.

I can also refinance my loan at 5.1% over 3 years, paying around £210 per month, thus saving around £700 in interest payments, shaving off nearly a year in repayment terms, and also being around £145 per month better off.

It may seem blatantly obvious what I should do, but my concern is that I've recently moved house and my wife has gone back to work part-time after having a baby. So, our monthly income/ outgoings are a little 'up-in-the-air' at the minute.

So, in a nutshell, my question is... should I pay off my debts now, and be done with them, or should I hang on for a few months to see how my monthly (net) income/ outgoings are after they've settled down?

jonesMUFCforever

IMO you need to keep something back in case of emergencies.
The rates you quote are pretty good and you may not get a similar rate should you decide to consolidate.
Why not pay off the most expensive loan now and save for a few months then start paying off the next most expensive etc?

OneLife_OneShot

I'd pay off the most expensive one then look at the best way to tackle the other one.

pheonixrising21

I'd go with the sentiments above. Pay off the smaller loan with the higher APR. That will leave you with about £6k savings still.

I'd add to what the others have said, maybe look at making manual overpayments using some or all of the £177 a month you will have extra from paying off the loan? Maybe pay off another £100 a month and save £77 to rebuild your savings?

The overpayments may not reduce your monthly payments but instead reduce the remaining term of the loan. You will have to ask the loan provider for the details of how this works.

BigEvs23

Thanks for the advice, guys

27col

Paying interest when you have money sitting earning nothing sounds a bit daft. Obviously you need to have some sort of a financial cushion, but as others have suggested, paying off the loan with the highest % would make a lot of sense.