Should I just clear it all?

zbre

Hi


My situation is I have a personal loan which I used to buy a new reliable car. I used a personal loan and savings to buy the car.

Monthly payment of loan in question £145 per month with 4 years to go.

Current settlement quote £6700

Early/extra payment charge 56 days interest £64.

Other debts@£0

Total access to 1 credit card/1 overdraft for emergency £4250

Current savings earning rubbish interest £5332.

Current monthly outgoings including savings £775



Options I have are

1. Pay an extra payment of £5332 and reduce the loan period.

2. Pay an extra payment of £5332 and reduce the monthly payment and save the remaining extra money to settle the rest quicker.

3. Pay the full amount but be in my overdraft for a month until I'm paid again and use credit card to pay for things like fuel and food then clear it in full when get paid.

4. Wait it out and suffer the £32 interest for another 2/6 then pay the full amount off without using any overdraft or credit card.


We all know situations can change and things can go wrong in life, even moods change and suddenly I want to go on a traveling holiday with my savings and be back to square 1. I really need to start saving for a house. What's the most sensible thing to do here ?

Tink_04

When you next get paid will you have enough to pay the loan in full?

zbre

After outgoings it would take 3 months or so to avoid using any credit or over draft

Tixy

It could depend on your overdraft interest rate or daily fee costs.

But I'd probably go for either 1 or 4.

FireWyrm

I'd use your savings up front to get rid of it almost entirely and then use whatever you can scrape from your budget to pay the rest off as quickly as possible. Without knowing your income and outgoings, it's hard to judge, but most people seem to have at least a few hundred slack in their budgets if they really set their minds to it.

Dont go travelling until you are free and clear basically.

chocoholic_chick

Forgive me if I've got this wrong but am I right in thinking if you were to leave the loan to run it's course for the next 4 years the total repaid would be £6960 whereas if you repay the loan early you'd pay £6700 + the £64 settlement fee so you'd save around £196 in interest?

I know First Direct currently have a savings account paying 6% interest on balances up to £3600 which would earn you just under £100 after tax after the year ( saving the maximum £300 per month ). If you put the rest into ISA's I can't help but think you'd be better off putting the money into savings, I would think you'd earn more than £196 interest in the 4 years and then have the money there incase any emergencies crop up.

Unless I'm missing something which is always a possibility :rotfl:

theoretica

chocoholic_chick wrote: »

Unless I'm missing something which is always a possibility :rotfl:

I assumed the '4 years' was not that exact.