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Keep 13k or pay off loan

FIRSTTIMER
FIRSTTIMER Posts: 637 Forumite
in Debt-free wannabe
Hi,


I currently have a zopa loan around 7k and just 13k in savings. The loan is 3% paying 140 a month. Shall I just pay it off and be debt free or keep it and let it just run for the next 4 years. What would you do? I feel like being single and having an emergency fund of just 5k is peanuts...but then is 13k really an emergency fund when I still have this loan debt.
«1

Comments

  • -taff
    -taff Posts: 15,582 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Not if you're not getting more than 3% interest it's not.

    You'll pay more in interest on the loan than you'll receive in interest on your money.
    Non me fac calcitrare tuum culi
  • FIRSTTIMER
    FIRSTTIMER Posts: 637 Forumite
    true...I think I may pay it off and startsaving again
  • datlex
    datlex Posts: 2,252 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Combo Breaker
    I would pay off the loan, check the settlement figure. Then divide up the rest of the money £1000 for emergency. Rest into a 3 to 6 emergency fund. Then start saving again for other items, future, general savings.
    Paid off the last of my unsecured debts in 2016. Then saved up and bought a property. Current aim is to pay off my mortgage as early as possible. Currently over paying every month. Mortgage due to be paid off in 2036 hoping to get it paid off much earlier. Set up my own bespoke spreadsheet to manage my money.
  • PKaurK
    PKaurK Posts: 52 Forumite
    It depends if your receiving more than 3% on your savings. If not, I would repay the loan, you would be better off.
  • theoretica
    theoretica Posts: 12,691 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Why would you borrow money just to have it sit in savings? If you have an emergency that needs more than 5k look at borrowing then.
    But a banker, engaged at enormous expense,
    Had the whole of their cash in his care.
    Lewis Carroll
  • enthusiasticsaver
    enthusiasticsaver Posts: 16,271 Ambassador
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    Definitely pay the loan off
    I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
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  • mandySaver12
    mandySaver12 Posts: 32 Forumite
    My_side_hustle wrote: »
    It depends if your receiving more than 3% on your savings. If not, I would repay the loan, you would be better off.

    This is exactly how I would look at it except that in practice you often don't want a massive chunk to leave your bank account at once.

    If your savings rate is less than the interest on the loan I would repay a significant portion depending on how much you would like to keep your nest egg but understanding that the extra interest you're paying on the loan is the cost of keeping a slightly larger egg
  • FIRSTTIMER
    FIRSTTIMER Posts: 637 Forumite
    I've decided to pay it off and keep 5k in savings and build up a nest egg again, debt free. If I need more than 5k I'll take a loan out or card
  • zippygeorgeandben
    zippygeorgeandben Posts: 1,277 Forumite
    Part of the Furniture 1,000 Posts Name Dropper Debt-free and Proud!
    Regardless of better off or not financially, I think that you'll be better off mentally. Get it paid off and then start an emergency fund.
    Savings as of April 2023 Savings account - £26460.50(14474.88)Current account - £2140.24(4576.79)Total - £28600.74(19051.67) £1010 (£65pm CS/BS) £250 CS/BS/JS
  • fatbelly
    fatbelly Posts: 23,735 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Cashback Cashier
    FIRSTTIMER wrote: »
    I've decided to pay it off and keep 5k in savings and build up a nest egg again, debt free. If I need more than 5k I'll take a loan out or card

    Seems sensible. As long as your credit history is OK, MBNA and Virgin are happy to do a Money Transfer card at 0% for a small fee.
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