Saving vs Paying off

PayOffTheLoans

I know the guide is always to pay off debt but I wondered if anybody had an opinions on my specific situation

Debt:
Natwest Loan 5528.31 8.9%apr No overpayments (old loan taken out in 2008) £144.47pcm a month
Nationwide Loan 11105.75 3.6%apr Overpayments without penalty 56months left to run (not counting overpayments made) £218pcm

I also have 400 on a credit card at 0% for 18months paying £25pcm (not too bothered about this as by paying the minimum payments I will pay this off before the 0% ends)

Savings:
I have £1400 in a nationwide savings account currently sitting at 5% for the year (until July 2017). I can pay £500pcm into this

I have £700 gaining no interest in a crap natwest savings account (£400 of this is a holiday fund)


As far as I can see it my options are
1. Continue to save into my nationwide savings account then when the 5% interest year is finished transfer into an ISA. This is my saving for a deposit fund
2. Take out the savings from the nationwide account (leaving a small buffer for emergency fund, 600pcm which is one months rent and bills is enough for me I think) and pay it towards the loan now thus reducing the overall term
3. Continue to save, get a early settlement with the natwest loan (they say I can pay lump sums just not regular overpayments) and get rid of this. Then move to option 1 or 2!

I have about £400 to pay towards debts/savings after monthly spends but if I have any more after I've saved £500 I put this to the loan

Any input on my best option would be gratefully received! Currently I'm thinking of saving as much as I can in the high interest account and then paying a chunk of the nationwide loan once the interest rate lowers and just letting the natwest run it's course.

datlex

Remember you won't get 5% on the full balance you save in the Nationwide account. You get 5% of money left in for a year, 11/12 of 5% of amount added in for 11 months 10/12 of 5% of amount added in for 10 months etc. Rough calculation:
Balance Interest % Interest likely
£400.00 5% £20.00
£500.00 4.5833% £22.92
£500.00 4.1667% £20.83
£500.00 3.7500% £18.75
£500.00 3.3333% £16.67
£500.00 2.9167% £14.58
£500.00 2.5000% £12.50
£500.00 2.0833% £10.42
£500.00 1.6667% £8.33
£500.00 1.2500% £6.25
£500.00 0.8333% £4.17
£500.00 0.4167% £2.08
Total £5,900.00 £157.50 £6,057.50

theoretica

PayOffTheLoans wrote: »

I know the guide is always to pay off debt but I wondered if anybody had an opinions on my specific situation

Debt:
Natwest Loan 5528.31 8.9%apr No overpayments (old loan taken out in 2008) £144.47pcm a month
Nationwide Loan 11105.75 3.6%apr Overpayments without penalty 56months left to run (not counting overpayments made) £218pcm

I also have 400 on a credit card at 0% for 18months paying £25pcm (not too bothered about this as by paying the minimum payments I will pay this off before the 0% ends)

Savings:
I have £1400 in a nationwide savings account currently sitting at 5% for the year (until July 2017). I can pay £500pcm into this

I have £700 gaining no interest in a crap natwest savings account (£400 of this is a holiday fund)

Is there any limit on withdrawals from the Nationwide?

1) Shut Natwest - your holiday fund should be in Nationwide earning interest.

2) Why borrow money at 8.9% to have it sitting earning interest at 5%? Pay off as much and as often as you can to the Natwest loan. Is there a limit to how often you can give them lump sums?

PayOffTheLoans

Unfortunately they don't specify how often but the agreement says 'occasional' lump sums so I don't think I would be able to pay off monthly extra otherwise this would definitely be my best option! I have contacted them for an early repayment sum so once I know that I would love to get rid of this loan. I took it out as a student to pay rent so I have nothing to show from it at all!

Am closing the natwest once the holiday is purchased. Can't transfer to the higher interest as I've paid the maximum

Thank you both for your advice, gives me something to think about!

Sanctioned_Parts_List

What's your credit rating like at the moment? I'd guess that, as you have a loan with a very low interest rate, and a recent 0% CC, it's not at all bad.

Something that might work, although it'll raise the hackles of the stricter DFWs here...
i) Go here and see if you're eligible for a 0% money transfer CC. If you are, you'll need one with a limit of £4000.
ii) If you are, apply and then transfer £3428 to your current account. Also recover the £2100 from your two savings accounts. Use this to pay off the expensive and inflexible Natwest loan in full.
iii) With the transfer fee, your debt will probably be in the region of £3530 (I assumed 3% fee, they're usually less). The £500 per month you claim to be able to save, plus the £114 already servicing that debt sees it gone in 6 months.

It does involve yet another card, but assuming you're disciplined enough only to keep the minimum info needed to cancel it later and shred the physical card the day it arrives, it can work - I've done it.

PayOffTheLoans

I can see the benefits of that but it's a bit risky for me I think. at least with the loans I can just switch back to my normal payments after overpaying if I have months with less disposable income.

Thanks for the advice though!