Cheap 1yr Loan?

oddoneout

I have an existing loan with 12 months to go (balance around £4k, though that may not be the settlement value). I am looking for a cheap way to repay it over the same timescale and since I have a Nationwide account I was hoping to use my overdraft to repay it, but their free overdraft only lasts for the first year you hold the account, so that's a no-go, as I have had the account for a few years.

Anyone got any other ideas?

[Deleted User]

0% money transfer card.

Depending on your loan APR of course.

oddoneout

Yes, thanks zx81, that's a good idea and I did check out some of these cards inside the MSE site.

The problem(?) is that my APR is only 3.8% and the 0% cards usually have a similarly-sized fee. This is OK if I needed a loan for a couple of years, but for one year, the saving is almost non-existent.

[Deleted User]

Cheapest way is just to pay it off in that case. A 3% fee would equate to a 6%ish APR over a one year pay off.

Only other suggestion is to get a 0% purchases card and throw all your spare cash at the loan, letting the card balance build up. As long as you have an exit plan for the card.

oddoneout

Mmm, since I don't have the spare cash hanging around to pay it off, I'm thinking that the best way is to try to economise around the house, get a cash-back card to be paid off each month and add the savings together to increase my loan repayment. That way, I may be able to pay it back a bit earlier and perhaps save a month's loan interest. This is my last debt and I just can't wait to get rid of it, but I guess I'll just have to have some patience.

Thanks for trying....

jonesMUFCforever

How long have you had the loan?
If a long time then you might find that you have already paid the majority of the interest on the loan and that most of your repayments now cover the capital.
Can you just overpay the loan (without charge)?..or save enough until you can afford to pay it all off.

oddoneout

Hi and thanks for the input. Overpaying is, I guess, the only option to get rid of the loan - I'll have to cut back and get a cashback card, as in my last post.
I don't see any way I can save at the same time as overpaying. If I can save any money, I'll just keep stuffing it in the loan repayment. It should be possible to finish it a bit earlier.

TrickyDicky101

If your APR is that low I wouldn't bother wasting time trying to find a cheaper way to pay it off. The savings will be less than £100 (and that assumes you find a 0% source without additional fees). Generous family member, maybe?

oddoneout

No-one in my family has that sort of money lying idle.

You're right that any savings would not be great - it's just the principle, really. I have decided to stick to economies and overpaying when I can. I really want to be able to say that I don't owe anything, you know?

Cheers all

Over and out

JimmyTheWig

oddoneout wrote: »

You're right that any savings would not be great - it's just the principle, really.

I agree. Why pay £76 in interest when you might not have to.
But equally there comes a point when you need to ask yourself how much hassle you want to go to to save what isn't a great deal of money.

I really want to be able to say that I don't owe anything, you know?

Paying off the loan with an overdraft or credit card money transfer wouldn't do that for you, though. Only, in the best case scenario, make you debt-free £76 earlier.

JimmyTheWig

Ok, this is what I would do.
Look at Stoozing.
Then apply that to your situation.

For example, the Virgin 0% interest for 32 months deal, with a 1.69% fee.
Apply for the card and hope you get a credit limit of at least £4200.
Transfer £4000 from that card into your bank account. (Note that very few cards allow this.)
Pay £67.60 transfer fee.
Use this to pay off your loan.

Set up a direct debit to pay off the minimum on the credit card each month. Probably about £40.
Pay the rest of what would have been your loan repayment (£300, I believe) into a regular saver such as Nationwide (as you already have their current account) which pays 5% interest.

After the year, move the money from the regular saver into a high interest account with easy access. Take £40 a month from there to pay the minimum payments on the credit card.
Use the money in this account to pay off the Virgin card shortly before the 0% runs out.


Interest from the regular savings account will be around £90.
Interest from the high interest (lets say 3%) account for the following 20 months will be around £164.
So you'll be up £187 on the deal, once you take the fee to Virgin into account.

That's better than £76 down on the deal if you let the loan continue.


But beware. This should only be done if you are organised and disciplined with your money.