Invest a grand or pay chunk off loan

[Deleted User]

Guru86 wrote: »

Due to getting the car I wanted for a grand less I have left over money. I am looking for people's view on investing this 1000 in something like ratesetter for a year or just pay it off the outstanding balance of loan?

It's a no-brainer for me: pay off as much of the loan as you can.

mgarl10024

Gadfium wrote: »

It's not a similar situation at all. A mortgage is secured on a house. A personal loan is secured on nothing more than the person. What the OP is talking about is borrowing money on a high-rate personal loan and then using that money to invest in a high-risk scheme for 12 months. Borrowing to invest can work, but it needs careful thinking about and a strategy. Its not something to do at the drop of a hat, especially given the high APR and low amounts.

I agree with everything you have said, except that the situations aren't similar.
The OP has debt, and has an unexpected £1000, and is asking whether to pay down their debt or to chase higher returns by investing (putting at risk) that £1000.

The situations are the same as far as I can see. The security of the loan in question had little bearing on the analogy.

justme111

No they are not. Your debt is calculated and expected while his is not.

cloud_dog

Ok so, the question to ask is... How serviceable is the loan repayment (monthly repayment)?

You've confirmed it has come out of the blue (due to an accident), and costs £275 per month.

As you don't appear to have used savings for this, I am assuming you have none / very little so, how serviceable is this new not insignificant monthly repayment amount?

Was the car covered by insurance? I'm assuming yes, so at some point you will receive an amount of money (likely not sufficient to buy a like-for-like replacement but most of the replacements cost).

Depending on the answer my first question and ignoring other financial considerations, you should simply pay down the loan.

Just as a side comment, I've funded probably our last 3 vehicles using 0% credit cards. There is/can be a fee but I find them cheaper than loans and far more flexible with regard to repayment / overpayments. I would only recommend this option for someone who is financially 'regimented' otherwise the costs can become horrendous.

principa

6% guaranteed return vs investment ? pay off the loan - there is far too much cheaper money out there chasing returns whose owners have & will settle for far less that 6%!

Anonymous101

Get a 0% credit card and settle the loan less the £1000... Or get the maximum 0% money transfer you can, settle the loan and invest the rest.