Pay off old or consolidate, when wanting new loan?

johnktm

Hello folks, my partner has a loan at the moment and we have some savings that could pay off the loan but we also want to do some necassary home improvements that would cost more than we have saved, so would it be best to pay off the old loan with the savings, then apply for a new loan, OR, apply for a new loan to pay off the old loan plus a bit extra to add to the home improvement pot?

Thanks for any advice.

foxy-stoat

What is the current interest rate of the loan you already have?

johnktm

Hi, sorry for the slow response, I have been out all day, the APR of the existing loan is quite high at 14.9%.

DCFC79

All depends on how much is left on the loan and what amount you could actually borrow and what rate you would be happy to borrow at.

System

If the interest rate on the loan is more than the savings use the savings to pay the loan off remembering to leave yourself an emergency fund.

Given what you want to do if you can get a new loan with a lower interest rate than the current one then a new loan would be better but only to offset what is owed on the current one and what you would need to top up your savings.