Should I pay personal loan in full now?

mariza_dim

Hello, 
I have a personal loan with I took out around two years ago to buy a car. It was for £8,000 originally for a 48-month term at 2.8% APR. I've made 25 payments of £176.24 up till now. 
The current balance is is £3,943.78 and I got a settlement figure for £3,967.87. I have about £10k in savings and expecting to get c£6k commission (pre-tax) at the end of October. We also plan to refurbish a downstairs loo in the next few months, which I'm budgeting c£3k for. 
Do you think it's worth paying the loan off in full now? How much would I save if I did?
Are there any calculators our there I could use?
Thanks

Socajam

I would wait until the commission is paid - anything can happen between now and October.

[Deleted User]

Unless you're getting more than 2.8% on your savings, it's worth paying off.

You'll save the difference between the two rates, less the early settlement fee. There are lots of loan calculators on the web which will show you the various scenarios.

sourcrates

Lol, 3k on a loo, the mind boggles........

mariza_dim

sourcrates said:

Lol, 3k on a loo, the mind boggles........

Haha I'm not actually sure how much it'll cost but thanks for the helpful comment

DrEskimo

mariza_dim said:

Hello, 
I have a personal loan with I took out around two years ago to buy a car. It was for £8,000 originally for a 48-month term at 2.8% APR. I've made 25 payments of £176.24 up till now. 
The current balance is is £3,943.78 and I got a settlement figure for £3,967.87. I have about £10k in savings and expecting to get c£6k commission (pre-tax) at the end of October. We also plan to refurbish a downstairs loo in the next few months, which I'm budgeting c£3k for. 
Do you think it's worth paying the loan off in full now? How much would I save if I did?
Are there any calculators our there I could use?
Thanks

Well you've paid £4,406 (£176.24*25) and your settlement is £3,967.87, so total amount paid would be £8,373.87. Given the original amount was £8,000 you have so far paid £373.87 in interest.

If you leave the loan to run the full term, it would cost £8,459.52, which would be a total of £459.52 in interest. So if you've already paid £373.87, and the total you would pay is £459.52, then settling early would save you £85.65 (£459.52-£373.87).

You have £10k + £6k and so far have only identified £3k for house refurbishment. Are there any other costs you need to use the money for? If not, you may as well settle the loan and save the £85.65.

DrEskimo

sourcrates said:

Lol, 3k on a loo, the mind boggles........

I suspect they mean a bathroom, which would require costs to rip-out old one, bathroom accessories (WC, bath/shower, sink, radiator, etc.) and of course decorating, tiling and labour.

I highly doubt they mean just £3,000 on a toilet!

mariza_dim

DrEskimo said:

mariza_dim said:

Hello, 
I have a personal loan with I took out around two years ago to buy a car. It was for £8,000 originally for a 48-month term at 2.8% APR. I've made 25 payments of £176.24 up till now. 
The current balance is is £3,943.78 and I got a settlement figure for £3,967.87. I have about £10k in savings and expecting to get c£6k commission (pre-tax) at the end of October. We also plan to refurbish a downstairs loo in the next few months, which I'm budgeting c£3k for. 
Do you think it's worth paying the loan off in full now? How much would I save if I did?
Are there any calculators our there I could use?
Thanks

Well you've paid £4,406 (£176.24*25) and your settlement is £3,967.87, so total amount paid would be £8,373.87. Given the original amount was £8,000 you have so far paid £373.87 in interest.

If you leave the loan to run the full term, it would cost £8,459.52, which would be a total of £459.52 in interest. So if you've already paid £373.87, and the total you would pay is £459.52, then settling early would save you £85.65 (£459.52-£373.87).

You have £10k + £6k and so far have only identified £3k for house refurbishment. Are there any other costs you need to use the money for? If not, you may as well settle the loan and save the £85.65.

This is so helpful, thank you

MinuteNoodles

Don't pay the loan if your interest or return on investment is higher than the interest rate on the loan which is trivial to do.

Doneby55

MinuteNoodles said:

Don't pay the loan if your interest or return on investment is higher than the interest rate on the loan which is trivial to do.

Trivial if you accept that the capital is at risk.

I'd say pay it off unless you're super confident in your ability to invest without risk of loss, or if paying it off would leave you with no emergency cash buffer of say 3 months expenses.

Grumpy_chap

sourcrates said:

Lol, 3k on a loo, the mind boggles........

It sounds about right, assuming just loo and hand-wash basin.  Tiling, ancillaries etc.
More for a full bathroom.