Is this a mad idea ?

Flugelhorn

Bored said:

I would just pay off the £5000 and then you can set up a standing order to redirect the spare £300 to premium bonds or a savings account if you wish.

I agree - would be nice to be free of the loan and then can save the money 

HenryMSingh85

You should pay off the debt incurring the highest interest. Regarding the actual question - it would be a horrible idea to invest in a premium bond vs paying down a 5k loan - for one reason, the interest you're incurring on your 5k loan is my best guess likely to be far higher than the interest that your premium bond will generate. So it's going to be value destruction for you. 

Also, its generally advisable to pay more than the minimum interest on the loan you're paying off because of the effect of compound interest - ie. the debt is going to snowball into something bigger over time unless you do something about it.

Henry 

enthusiasticsaver

What interest rate are you paying on the loan and the other debts you hold?  Personally I would use the £5k to pay off debt.  Premium bonds are not as good as they once were. 

Singlespeeder

I quite like my PB's ...but I have a reasonable amount of them and did 'win' £5000 a few months back.
I'd not really suggest it as a sensible option in this case though. £5000 isn't a big holding.
As OP says all debts are on 0% for now there's a slight argument for investing in the highest interest easy access account you can find .... unlikely to even be 5% now though and even if you left the whole £5k in for a year ( which is not what you're suggesting you'd want to do) you're, at best, looking at £250 interest. 
But something is better than nothing,,,, if you pay the £5000 off now you'll have cleared £5000 worth of debt vs investing and slowly reducing the investment, which might yield £150-£200 so you'd clear £5200 of debt.
Marginal gains.

Highlanddream

I will pay it straight off the loan, it was more than I expected so will clear two loans and save myself 500 a month in payments to add to the rest of debts. Should make a rapid dent in them.