Repaying Loan off Early - Extra payments Vs Money Transfer

Worfc23

Good morning all,

I'm looking for a bit of advice with regards to paying my loan off early, and would also like a double check of my maths to ensure I'm getting this right.

Current outstanding loan balance: £8,358

Monthly Repayments left: 33 at £283 (so total left to pay = £9339)

Settlement figure today: £8363 (just made my latest repayment 2 days ago)

I have managed to free up a further £50 a month I could use towards paying my loan off.

However, I also have a 0% money transfer offer on one of my credit cards, which I have enough credit to pay off the loan. This, however, includes a 3.5% fee. So this would mean 8363 + 3.5% = £8656. The only downside is the 0% is only available on the card until 30 Nov 2026, so 15 months.

15 months x £333 (my original loan repayment + £50 extra per month I'm planning on paying) = £4995. This would then leave £3661 left to pay. I would then need to do another money transfer, as my usual interest rate applies of 21.9%. I have another card with £6000 credit limit on that I'd be able to use, and they've offered me 0% money transfers for about 2 years now, but for 12 months with a 5% fee. 

So presume this is the case in 15 months time, £3661 + 5% = £3844. Paying the £333 a month would obviously clear this in 12 months.

So, doing it this way would mean 27 Repayments at £333 per month, bringing the total cost (with both transfer fees) to £8991, but would obviously pay it off 6 months earlier and save me about £348 than if I was to just carry on paying the £283 a month to my loan.

I think I am correct with all of the above (please correct me if I am wrong). The bit I struggle with is if I were to keep paying my usual repayment to the loan company, but then pay off the £50 a month extra towards the loan each month. My conditions state I can make additional payments towards the loan without incurring fees, and as long as I make the additional payment 10 days before my usual payment, it will be used as an additional payment rather than reducing the following payments direct debit.

Therefore, could anyone advise how much I would save by taking this option, and approx how many months earlier the loan would be repaid? Could my loan company tell me this? Is it just as simple as taking the £50 a month off the £9339 total?

Just for clarity (in case you need it to calculate). When I took out my loan, these were the details:

Total loan amount: £14,000

60 monthly Repayments of £283

Total amount to be paid: £16,980

Agreement end date: 25/05/28

Rates of interest which apply to the credit agreement: 8.000%

APR: 8.3%

FYI, I have no other debts.

Sorry for the long winded post. Thanks in advance.

DrEskimo

According to this calculator it would save you £168 by overpaying £50 each month on the current loan, but double check as may have used wrong numbers:

https://www.themoneycalculator.com/loans/calculators/loan-overpayment-calculator/

0% money transfer would save most, but the risk is not getting another 0% money transfer card in 15months time. The high interest after the 0% period would quickly erode your savings I imagine…

Worfc23

DrEskimo said:

According to this calculator it would save you £168 by overpaying £50 each month on the current loan, but double check as may have used wrong numbers:

0% money transfer would save most, but the risk is not getting another 0% money transfer card in 15months time. The high interest after the 0% period would quickly erode your savings I imagine…

Thank you for the link & advice! Don't know why I didn't think to just Google loan overpayment calculator!

As you say there's a risk of what will happen 15 months down the line. I think I will start the £50 overpayment each month as my initial thought was to pay it off earlier than the current end date. 

Thanks again.