Regular saver or regular extra payment on loan?

organometallic

Hi folks,

I'm one payment into a 5 year loan of £9640 at 5.9%APR (total debt if payed to schedule £11115.96 - monthly repayment of £185.26)

I recently transferred to the First Direct account (£125? Yes please) and (due to a recent payrise due to getting a new job) think that with enough scrimping I should be able to max out the 6% regular saver account they offer with it which after a year (including interest) should be around £3680ish

So my question is this.. What is the best option?

(a) Putting the £300 a month into the reg saver @ 6% and then using the resulting lump sum to make an overpayment on the loan after a year

or (b) making an overpayment on the loan of £300 a month and ignoring the regular saver

My brain is struggling with the mathses here..

[Deleted User]

Is the 6%, from the saving account, before or after tax?

Rob_192

The 6% FD account is gross interest, so you will only get 4.80% after tax, so the loan overpayment is marginally better.

I would do the overpayment in any case, just in case you're tempted to treat yourself to something else with the FD lump sum!