Overpay on car loan

Bambi_

New to forum but keen to sort my finances out so hope someone can help!

I'm currently working my butt off to pay off a credit card (current balance around £1,650). Once I've finished paying that, I'll have about £250 "spare" A month. My only other debt is a car loan with FGA Capital, original loan amount of £7,000 over 60 months. So far I've only made 2 payments but keen to get rid of this debt asap.

My question is, would it be worth overpaying each month by £250 to pay off the loan faster? Rather than put the money in savings or something? Is there any reason this wouldn't be a good idea?

Thank you!

lee111s

What interest rate is the car loan?

More than likely yes it will be beneificial to pay it off early but you'll need to check with the loan provider that you're OK to do so.

Bambi_

Thanks!

I've had a look through the paperwork and it doesn't say anything about early repayment charges but I might give them a call to check.

The APR is 15% :eek: I'd just got my first 'proper' job and my 11 year old Punto died so I'd felt I NEEDED this car and could afford the monthly payments. But I've realised that it's not a good deal which is why I'm keen to get rid of the debt asap!

Foxy-Stoat_3

Bambi_ wrote: »

But I've realised that it's not a good deal which is why I'm keen to get rid of the debt asap!

You have only just realised !

Maybe worth paying £250 into Premium Bonds for a year or two then paying a chunk off loan, just incase you need the money for something later on.

Get the credit card paid down first though !

thebritishbloke

Out of curiosity, how do your credit files look? If you tell us of any issues such as past defaults, missed payments, accounts etc then we could advise of a cheaper way to borrow money to pay off the car loan.

Otherwise, get the credit card paid off ASAP, then throw as much money as you can into paying off the car loan. Is the car loan a full hire purchase or is it a PCP or a HP with a "balloon" payment?

CrisAdams

I would pay off the credit card debt first. If you have a good credit score then I would refinance the car at a lower rate. It is always a good idea to get pre-approved for a loan, such as through a credit union. It gives you better bargaining power on car price and they may give you a lower interest rate.

Bambi_

Thanks for your replies.

No defaults, missed payments or anything like that. Credit card debt built up as a student (no other debt and at least minimum payment always made) and car was a 'treat' to myself for getting a proper job haha. I was a bit hasty due to old car dying suddenly and needing one to get to work.

I can easily afford the payments but don't really want to pay over the odds for interest etc. I'm 25 so it's no excuse but I don't feel like it was explained particularly well and it seemed like a good deal at the time!

Final payment is about £400 I think, to cover admin costs but other than that, it's just fixed monthly payments.

thebritishbloke

Once your CC debt is paid off, I'd try and apply for an MBNA Long Balance-Transfer card. They offer money transfers for a fee (this will let you send money from your CC to your bank account) which is then at 0% for 24 months. You can use this as a cost-effective way to pay off the balloon payment.

Just make sure you calculate how much you'd have to pay to MBNA each month to pay off whatever you borrow within the 24 months. Hopefully you get a large enough credit limit to pay off a large majority.