Overpaying Tesco Bank Loan

debtfreeby2020_3

Hello everyone.

I am new around here. I apologise if this has been covered but I couldn't find a thread with a similar title.

Background

In 2017, I took out a Tesco Bank Personal Loan (unsecured) of £5000. The nominal interest rate is 4.2175%. I pay £149.14 per month, which is totally manageable on my salary. The current balance is £4,026.75. Due to repay in full by May 2020.

I am also paying off a Barclaycard which has approximately £20 worth of interest added to it each month. The interest is 18.9% standard rate and 27.9% cash rate (consolidated). The current balance is £3196.79. Minimum payment is around £73 a month.

I have managed to get myself out of overdraft for the first time in 3 years. I made it my priority to get 'current' on that. I have set myself quite a strict budget. I am now finding myself with my bank account in the black to the tune of £250 each month. That's after putting £100 into my emergency fund.

Question

I am finding the Tesco Bank payment of £149.14 to be quite demoralising. I know - it is my own stupid fault for taking it out in the first place. I have been paying it for almost a year now and I feel that I haven't made much of a dent at all.

My question is. Should I overpay the Tesco Bank Loan or the Barclaycard. If I do overpay my Tesco Bank loan, will the monthly amounts reduce or the official loan period?

Thanks in advance!

L xXx

[Deleted User]

You overpay the highest rate.

Additionally, look at balance or money transfer options.

debtfreeby2020_3

Thank you zx81.

damoC

I'd pay the card first, assuming the interest was pre-loaded on the the loan. If the loan accrues interest on a monthly basis then go for the highest rate first.

debtfreeby2020_3

The interest was pre-loaded. Thanks for highlighting this. I didn't think of that.

[Deleted User]

The interest isn't pre loaded.

It accrues on a daily basis.

Your balance may be displayed with the interest to the end of term, but early settlement means you don't pay it all.

debtfreeby2020_3

Ah ok! I didn't realise this. I *believe* that I have to pay two months interest for an early settlement but as you say, that's not the same as paying the quoted interest.

Can't wait to get this figure into the £3000s. Only then will I feel that I am making any progress at all. Feels like I have been in the £4000s for a lifetime.

The most annoying thing about Tesco Bank is that you have to call them to make any extra payments. I don't understand why that is. I am not going to do this until the CC is paid off, of course!

Dobbibill

Aim to overpay on the BC first as it's on a higher APR.

When that's done reassess how much has been paid off the loan - then use the funds you were using for BC to overpay more on the loan or even see if there's a MT offer on your BC to move the loan to a 0% promo on BC.

dresdendave

Well done to the OP for tackling their debt issues by living on a strict budget to generate more cash to increase repayments.

Makes a change from the "one easy repayment" consolidation approach.

debtfreeby2020_3

When you say a money transfer deal - do you mean pay the cash into my account and use it to pay off the loan? Or can I transfer the balance of my loan to my credit card directly without accruing interest?

Sorry if that’s a dumb question. I am new to all this.

debtfreeby2020_3

Thank you Dresdendave! I have had enough of this now. Need to get my finances in order to have a happier life. This debt is like a millstone around my neck.