Is making overpayments on my car loan going to help?

RLC21

Earlier in the year I took out finance to help pay for a new car, and I want to try and clear it, but I'm also saving for a house so want to work out whether to just keep the payments as they are for the term I originally took it for & put money into savings, or make overpayments on the loan whilst I'm saving.

The original loan was £7105.98, and the monthly instalments are £169.19, and annual interest is 9.7521%.

The current balance is £6260.13, would it help me to pay off chunk sums e.g. the occasional £500, or will it make very little difference?

Similarly, would it look better to have smaller regular monthly payments or a shorter term? I'm looking to apply for a mortgage in the next year and want to make sure that my statements work in my favour!

Thanks in advance!

[Deleted User]

Making overpayments will lower the interest you pay, from financially, it's a good idea.

The lower the debt you have when you apply for your mortgage the better. Try to have it gone before you apply as it will lessen the amount you will be able to borrow.

RLC21

Thank you! I thought as much - so ideally I need to reduce the overall loan as opposed to reducing the term time?

thanks

foxy-stoat

Keep the repayments the same and lower the term.

If you have enough cash deposit for your mortgage and moving fees then its a good idea to overpay the loan, if you dont have enough cash to move then it may be better to save the cash and keep the debt.

RLC21

Thank you! I'm trying to work out whether the mortgage will be calculated on my monthly affordability or my yearly.. in terms of my monthly affordability my monthly loan repayments are less than 10% of my monthly income, but I don't want mortgage brokers to judge it on the whole loan if I've reduced the term to :think:

foxy-stoat

In my experience they take your debt as a whole and your fixed monthly commitments into account when they apply their affordability calculators.

Terry_Towelling

How much do you actually have saved for your mortgage cash deposit?