Overpaying a Loan: A Good Idea or Not?

20aday

Hello fellow MSEs,

I've got a NatWest loan which is scheduled to complete in June 2017.

The APR is 19% and my monthly repayments are £129.78. I've also been making additional overpayments at £20 a month since March of this year (the loan should've completed in October 2017.)

I've been doing my sums and including the monthly repayment I could make further overpayments of £380 a month on top if I used my Sainsbury's MasterCard which is interest free until next year.

I know I've got to factor in the minimum payments due on the credit card but can set some money aside for that no problem.

Is it worth my while spending on the credit card and then using the money I set aside for that each month towards the loan?

Thanks for your help.

Thrugelmir

How will you repay the accumulated credit card debt?

Better to find real cost savings in your budget and use these to overpay the loan.

20aday

Thrugelmir wrote: »

How will you repay the accumulated credit card debt?

Better to find real cost savings in your budget and use these to overpay the loan.

The plan was to use the amount I put back each month for the loan's Direct Debit towards the Credit Card repayments once I'd cleared the more expensive debt.

Thanks for your help, though-I am going to cut back where I can and put more towards the loan. Was (foolishly?) hoping I'd be able to get shot of it quicker, that's all.

CLAPTON

what is the APR on your Sainsbury CC once the interest free period is over?

Tixy

So your capital outstanding is likely around £2850 currently? (estimated)

And you are thinking that you will pay off £510 a month for the next 6 months to clear the debt quicker and pay less interest?
(Likely around £160 interest instead of £650 ish)

Then in 6months time you divert the £510 a month to pay off the £2280 ish that has built up on the credit card (which you could then pay off in say 5 months)?

If your 0% on purchases last for at least 11 months I think you would save around £390 interest overall than if you left it at the £129 a month (doesn't factor in the overpayments you are already making or the minimum payments on the cc but gives an overall idea).

andyfromotley

I'm confused.

Why don't you just pay the loan with the 0% card in full? Then attack the cc. Hit it hard enough and you will avoid any interest. (But if you can't clear it make sure the interest rate isn't high or preferably transfer to another 0% card)

The way you suggest seems l long winded.

20aday

My APR is 16.9% (the headline rate when I took the card out.) That was the plan Tixy, yes. Andy I would've used the card to pay the loan in full however there's no interest free option to do so (they charge 25.95% for cash advances)

Cycrow

andyfromotley wrote: »

I'm confused.

Why don't you just pay the loan with the 0% card in full? Then attack the cc. Hit it hard enough and you will avoid any interest. (But if you can't clear it make sure the interest rate isn't high or preferably transfer to another 0% card)

The way you suggest seems l long winded.

Most loans/credit dont allow you to pay it off with a credit card.

This only usually works if you have access to a money transfer

robatwork

Or cut out the fags and have an extra £2,000 to pay off your loan each year?

20aday

Trust me that's another 'negative' in my life I've got to tackle!

ava77

Cutting out the fags is definitely easier said than done. The money incentive helps. But it is a struggle.
Wishing you luck.