Pay off loan?

col81

A family member got a loan for me a couple of years ago I owe £6k on it and it a low rate. I have £6k savings should I clear it and be £220 a month better off and start saving again? Difficult 

sonofmerton

col81 said:

A family member got a loan for me a couple of years ago I owe £6k on it and it a low rate. I have £6k savings should I clear it and be £220 a month better off and start saving again? Difficult 

if it were me, i would leave it a bit until you have a bit more saved. using all your capital to clear the debt is something many champion on here, but if you needed cash for an emergency, then your bank via friend? will likely be chomping at the bit to give you another loan/credit card. then you would be back where you started. seen it happen many times.

i would open up another account, put 2k of the savings in that. then go all out to get the original account up to 6k again. by that time you will have more than enough in that account to pay the loan off and a nice 2k sitting in another account. at all times during the process and going forward you would have cash for an emergency. 

good luck.

peteuk

col81 said:

A family member got a loan for me a couple of years ago I owe £6k on it and it a low rate. I have £6k savings should I clear it and be £220 a month better off and start saving again? Difficult 

Who is the loan with, what's the interest rate, what's the status of the loan? Have you asked for an early settlement figure?  That way you can work out how much your saving by paying early.  Eg Balance £6k settlement £5K not only are you now not paying £220 a month for the loan but saving £1K in interest. 

I have a high interest loan, current balance is £7185 yet settlement is £4665 over £2500 difference (but that's because its high interest and loads of payments left.  Might be worth checking what they will refund in interest and then may be offering a full and final (depending on who the loan is with)   This might lead to you being able to put some of the £6K in a new account as an emergency and paying the loan off at the same time. 

GOOD LUCK! 

Batesy1976

peteuk said:

Might be worth checking what they will refund in interest and then may be offering a full and final (depending on who the loan is with)   This might lead to you being able to put some of the £6K in a new account as an emergency and paying the loan off at the same time. 

GOOD LUCK! 

Why would a creditor accept a full and final settlement on a loan that's being paid off, presumably according to the agreement?  Or refund some of the interest for that matter?

Jami74

col81 said:

A family member got a loan for me a couple of years ago 

For this reason alone, pay it off.

teachfast

Batesy1976 said:

peteuk said:

Might be worth checking what they will refund in interest and then may be offering a full and final (depending on who the loan is with)   This might lead to you being able to put some of the £6K in a new account as an emergency and paying the loan off at the same time. 

GOOD LUCK! 

Why would a creditor accept a full and final settlement on a loan that's being paid off, presumably according to the agreement?  Or refund some of the interest for that matter?

Because they do. 

Batesy1976

teachfast said:

Batesy1976 said:

peteuk said:

Might be worth checking what they will refund in interest and then may be offering a full and final (depending on who the loan is with)   This might lead to you being able to put some of the £6K in a new account as an emergency and paying the loan off at the same time. 

GOOD LUCK! 

Why would a creditor accept a full and final settlement on a loan that's being paid off, presumably according to the agreement?  Or refund some of the interest for that matter?

Because they do. 

Outside of the one example, someone will presumably spend hours digging out to try prove me wrong, are you really suggesting that a finance company, with a loan that is being paid of as agreed, is going to accept a reduced settlement figure?  I don't think I've ever heard of that happening, as there is almost nothing to gain from doing it.

Even if there was any realistic chance of this happening, the creditor would mark it as a partial settlement, which you really don't on an otherwise "good" credit file.

Mickey666

Batesy1976 said:

teachfast said:

Batesy1976 said:

peteuk said:

Might be worth checking what they will refund in interest and then may be offering a full and final (depending on who the loan is with)   This might lead to you being able to put some of the £6K in a new account as an emergency and paying the loan off at the same time. 

GOOD LUCK! 

Why would a creditor accept a full and final settlement on a loan that's being paid off, presumably according to the agreement?  Or refund some of the interest for that matter?

Because they do. 

Outside of the one example, someone will presumably spend hours digging out to try prove me wrong, are you really suggesting that a finance company, with a loan that is being paid of as agreed, is going to accept a reduced settlement figure?  I don't think I've ever heard of that happening, as there is almost nothing to gain from doing it.

Even if there was any realistic chance of this happening, the creditor would mark it as a partial settlement, which you really don't on an otherwise "good" credit file.

Surely one possible gain is that there is no risk of default?  Besides, what's the harm in asking?  Don't ask, don't get

Besides, what if the OP were facing imminent redundancy and would't be able to repay the loan in future?   if you were the lender, would you allow them to pay off the outstanding loan while they can or would you prefer to risk them defaulting and perhaps NEVER paying it back?

And why would paying off the loan in full be recorded as a 'partial settlement'?  If it's with the agreement of the lender then surely it would be a full settlement?

Batesy1976

Mickey666 said:

Batesy1976 said:

teachfast said:

Batesy1976 said:

peteuk said:

Might be worth checking what they will refund in interest and then may be offering a full and final (depending on who the loan is with)   This might lead to you being able to put some of the £6K in a new account as an emergency and paying the loan off at the same time. 

GOOD LUCK! 

Why would a creditor accept a full and final settlement on a loan that's being paid off, presumably according to the agreement?  Or refund some of the interest for that matter?

Because they do. 

Outside of the one example, someone will presumably spend hours digging out to try prove me wrong, are you really suggesting that a finance company, with a loan that is being paid of as agreed, is going to accept a reduced settlement figure?  I don't think I've ever heard of that happening, as there is almost nothing to gain from doing it.

Even if there was any realistic chance of this happening, the creditor would mark it as a partial settlement, which you really don't on an otherwise "good" credit file.

Surely one possible gain is that there is no risk of default?  Besides, what's the harm in asking?  Don't ask, don't get

Besides, what if the OP were facing imminent redundancy and would't be able to repay the loan in future?   if you were the lender, would you allow them to pay off the outstanding loan while they can or would you prefer to risk them defaulting and perhaps NEVER paying it back?

And why would paying off the loan in full be recorded as a 'partial settlement'?  If it's with the agreement of the lender then surely it would be a full settlement?

If you pay less than is contractually owed, it's a partial settlement.  It has nothing to do with what the lender agrees to, and everything to do with what you agreed to when you applied for the loan.

GrumpyDil

I'm confused.

If the OP settles his loan early then he saves the interest that would be accrued between now and when the loan would be settled by maintaining normal monthly payments.

That's not a partial settlement but early settlement. 

Batesy1976

GrumpyDil said:

I'm confused.

If the OP settles his loan early then he saves the interest that would be accrued between now and when the loan would be settled by maintaining normal monthly payments.

That's not a partial settlement but early settlement. 

Yes, it is.  However peteuk wasn't suggesting that, they were suggesting a "full and final" (it's never full but never mind) settlement, which is essentially a reduced settlement, below whatever the current settlement figure is.  That is a partial settlement.