Advice Needed on a Loan/Mortgage

Muppet81

In December 2005 we had to do a massive re-jig of our finances when I left my well paid job and downsized.

We did lots of things right and used loads of helpful advice from MSE.

We did do two things which I knew at the time were not a great idea but we seemed to have little option at the time.

Rolled car loan for VW Lupo into re-mortgage. I know this was an expensive way but we had little option. Don't really think about this now - it is just our mortgage and we are making overpayments.

In 2004 we had bought a new (2 yr old RAV 4) car and as my OH owed some on his existing car we rolled this into the loan.

On the re-jig in 2005 we found a better deal for the loan but extended it by a year - yes I know - we should not have done it

New loan with Cooperative was for £18,000 over 72 months at APR of 5.84%
We now have about £13,800 still owing on a car which is only worth about £10,000. Not good :eek: Payments £296.95 per month

We do want to keep the car - I need to get to work and it is our workhorse for collecting logs - free wood for our woodburner for the winter. It does not do a high mileage now as our second car is a VW Lupo and cheaper to run so OH uses this on a daily basis. Take the view we will keeep the Rav 4 and "run it into the ground".

Cooperative won't let us increase payments or pay off lump sums to reduce the term - just say that we can clear it all with a lump sum at any point.

I am looking at any way to make this loan less of a millstone round our necks.

I am working but only earning between £200 and £400 a month. We had made the decision to try to use virtually all my pay to make overpayments on our mortgage each month to reduce that.

We have £2000 in premium bonds and £1500 in a savings account. The £1500 really needs to stay in the saving account as it is sort of earmarked for jobs in the future. The £2000 could be put to better use in my opinion but OH adamant he wants it in PBs as they give him a bit of a dream of winning.

Have looked at a HSBC credit card offer with 4.9% for balance transfers until 31st June 2012. This would give us the flexibility to make overpayments and pay it off quicker. There is a 2.5% balance transfer fee though.

Does anyone have any advice?

We feel we have in general got our finances into reasonable order, we have no credit card debt and are determined to make mortgage overpayments BUT are we right to do this or would we be better trying to resolve the car loan first?

Just in a "can't see the wood for the trees" situation and would love some other views.

Look forward to hearing from you. I know you all talk a lot of sense.

scottishsuz

I have a car loan that overpayments can be made on too. I save money into an ISA so I can pay it off early. Maybe you could consider doing that? Some accounts are giving a return of about 6% so you can make more than your paying in interest.

I personally wouldn't use the savings you have just now, a fall back could be handy in the future.