Loan repayments - snowballing advice

peteuk

At present I have three loans and I am looking at which is the best way to pay these off. 

Loan one Credit Union Balance £909  monthly payment £212  Payments left 5
Loan two Amigo Balance £1463 monthly payment £121 Payments left 12
Loan three George Banco Balance £6704 monthly payment £239  Payments left 27

Plan - We have some savings (we could pay all three) but that is our deposit for a house. So pay loan one off, use the £212 to then pay Loan two (making payment £333) which means 4 payments and a small pay off.  (Last payment being Jan 22)  Then using that £333 to pay off the last loan, making payment £572.  Which pays the loan Dec 22 a year early. 

This means we use less of the deposit (£1K max) I know the settlement figure for GB saves over £2K but I don't really want to dent the mortgage deposit by £4K. 

Pete

JayRitchie

Could you check the balances, payment amounts and interest rates and update this thread?

The Amigo loan looks unusually reasonable - 12 payments at £121 is £1,452 which is less than the outstanding balance. Are they not charging any interest?

For George Banco - 27 x £239 = £6,453 - again less than the balance.

enthusiasticsaver

I think the Amigo and GB loans must have the interest front loaded as it looks like it costs you less to continue with the payments than repay it early.  You need to check interest rates and if there is any discount for early redemption. Repaying loan one early saves you around £150 so I would start with that.

peteuk

JayRitchie said:

Could you check the balances, payment amounts and interest rates and update this thread?

The Amigo loan looks unusually reasonable - 12 payments at £121 is £1,452 which is less than the outstanding balance. Are they not charging any interest?

For George Banco - 27 x £239 = £6,453 - again less than the balance.

 Last settlement email 27 Jul had the balance at £6704, Ive made two payments since.  The email also provides a settlement with is £4379.

peteuk

enthusiasticsaver said:

I think the Amigo and GB loans must have the interest front loaded as it looks like it costs you less to continue with the payments than repay it early.  You need to check interest rates and if there is any discount for early redemption. Repaying loan one early saves you around £150 so I would start with that.

Certainly the GB loan is front loaded, current outstanding balance is higher than the loan and its coming up to two years of payments in November.  Not 100% sure on the Amigo loan.

Settlement figures/Balances

Loan one £909 (Balance) 
Loan two £1463 (Balance) 
Loan three £4379 (Settlement dated 27 Jul) 

TheAble

https://www.amigoloans.co.uk/help/interest

"We calculate our interest daily. This means you only pay interest for the time you have the loan."

You'll have to check each one - maybe call up customer services? - but it makes little sense holding "house deposit" money earning little interest when you've simultaneously got high interest loans working against you. Do you plan to/could you even purchase a house anyway while you have these loans? If not, you may just as well pay them off using your savings and then start building up your pot again.

enthusiasticsaver

I would definitely pay off that GB loan then as it saves you so much in interest.  Realistically are you going to be in a position to house hunt any time soon? How high a deposit do you need and how much have you got?  Is it in a LISA or similar account specifically for buying a house? If you got rid of the debt you would have an additional £570 a month approx to replenish your savings and if you have debt any mortgage would reduce the amount they would lend you anyway. Normally you would get rid of the debt first and build up emergency savings then house deposit. 

peteuk

enthusiasticsaver said:

I would definitely pay off that GB loan then as it saves you so much in interest.  Realistically are you going to be in a position to house hunt any time soon? How high a deposit do you need and how much have you got?  Is it in a LISA or similar account specifically for buying a house? If you got rid of the debt you would have an additional £570 a month approx to replenish your savings and if you have debt any mortgage would reduce the amount they would lend you anyway. Normally you would get rid of the debt first and build up emergency savings then house deposit. 

We currently have £46K in savings, which provides us with a 10% deposit on £300K house.  I realise I can phone up tomorrow and clear all three loans, however I don't want to dent that pot too much.  Having spoken to a mortgage advisor we are gong to hopefully add to the pot and start looking at houses in the new year.  Hence why I don't want to dent the pot too much and equally pay £4K to GB gives us little time to recoup the money before we start looking for a house.  Due to age I am already looking at a 19 year mortgage, don't want to be paying a mortgage at 70.

Savings is in a normal savings account, as received only recently. 

JayRitchie

peteuk said:

enthusiasticsaver said:

I think the Amigo and GB loans must have the interest front loaded as it looks like it costs you less to continue with the payments than repay it early.  You need to check interest rates and if there is any discount for early redemption. Repaying loan one early saves you around £150 so I would start with that.

Certainly the GB loan is front loaded, current outstanding balance is higher than the loan and its coming up to two years of payments in November.  Not 100% sure on the Amigo loan.

Settlement figures/Balances

Loan one £909 (Balance) 
Loan two £1463 (Balance) 
Loan three £4379 (Settlement dated 27 Jul) 

Ah, ok - the interest rates on loans 2 and 3 look huge. How much do you have in savings?

At those rates you would be better off dumping all the money you can on the loans and use the reduction in payments to rebuild your deposit.

peteuk

JayRitchie said:

peteuk said:

enthusiasticsaver said:

I think the Amigo and GB loans must have the interest front loaded as it looks like it costs you less to continue with the payments than repay it early.  You need to check interest rates and if there is any discount for early redemption. Repaying loan one early saves you around £150 so I would start with that.

Certainly the GB loan is front loaded, current outstanding balance is higher than the loan and its coming up to two years of payments in November.  Not 100% sure on the Amigo loan.

Settlement figures/Balances

Loan one £909 (Balance) 
Loan two £1463 (Balance) 
Loan three £4379 (Settlement dated 27 Jul) 

Ah, ok - the interest rates on loans 2 and 3 look huge. How much do you have in savings?

At those rates you would be better off dumping all the money you can on the loans and use the reduction in payments to rebuild your deposit.

Interest rates

Loan One 9.3% (will check tomorrow) 
Loan Two  49.9% 
Loan Three 49.1%

Savings is £46K which is the deposit for a house, this was not saved but produced as a one off payment. We are looking at buying Feb/Mar next year, so looking at paying as much of the loans off without denting the savings.   Just by paying all loans off between now and Mar we would save £3K which would be less than half spent. 

TheAble

49% interest??! Is it not obvious to you that you need to pay that stuff off urgently? Every day that goes by is costing you a fortune.