Final Sprint....advice needed

markwilliams82

Well back in December 2004 I took out a £16k personal loan from Nationwide. I've now paid nearly 3 years worth of payments, with my loan due to end in December 2010.

Last month I also canceled my PPI, which resulted in them sending me a cheque for (off the top of my head) approx. £850. Which I have since paid into my savings account.

I have a current settlement figure of £10,706. And £5000 in my savings account. Now although I still have £5k left to save up for (at the moment anyway, I know this will decrease with the monthly payments I repay) I'm starting to think of the best ways to finish off my loan.

From what I can think of I've come up with 3 ways to do it, I'm after your advice about which are more appropriate and suitable.

1) Keep making the payments, and saving approx £250-£300 a month until I can settle. Which could take another 9-10 months.

2) Save and make repayments for another 4 months so I have a settlement of near £3000. Take out a flexiloan with my bank HSBC, so that I can clear my £16k and deal with a £3k loan, which I can make flexible payments with and repay a lot sooner than the term of the loan.

3) Pay the £5000 I have at the moment as a lump sum payment towards the settlement, and see how things go from there (ALTHOUGH I HAVE NO IDEA OF HOW MY LOAN WOULD WORK AFTER MAKING A LUMP SUM PAYMENT)


My opinion is that option "2" Take out a small loan to clear my big loan and make flexible repayments is my preferred option, as this will give me the boost of cutting a £16k loan down to a £4 loan. Going without any PPI from the start, and having a smaller loan which should result in less interest being paid and extra money being lost by myself

CLAPTON

We would need some more information

a. what is the APR of your current loan
b. can you make overpayments and is so does the money reduce the capital oustanding and so the interest payable falls in proportion.
c. what penalties are there for early settlement.
d. what is the aer of the saving a/c
e. if you get a HSBC loan ... what is the APR?
f. is the HSBC fully flexible i.e. no costs for early settlement or for overpayments

markwilliams82

I'll try and answer as much as I can,

a. 6.70%
b. i spoke to nationwide who said I'm able to pay a lump sum towards the figure of £11889.06. My monthly repayments would stay the same, and the overall loan period would be reduced.
c. no penalties
d. not sure what my savings account aer is, I think for the online saver with hsbc its 3%
e. the flexiloan has a 16.8% variable rate, which depends on the balance of your flexiloan. it basically works as an overdraft
f. and its fully flexible, I've used them in the past for short term loans which i've paid off within months. you can make over payments an no costs

CLAPTON

Replacing a loan at 6.7% with one at 16.8% seems, all things being equal like a very very bad idea.

Unfortuately your answer to my 'b' question isn't sufficient. The question is that if you make a £5k overpayment does it reduce the overall amount of interest thats paid.

If it does then I would suggest you use the 5k to reduce the current loan.
Then if you can overpay each month then do that or if not then simply save the money in a decent rate saving a/c (say gross 6%) until you have sufficent to settle the loan completely.