Seems like a no brainer ... but thought I would check

Needcash_3

Guys,

I have a small question which I initially thought I knew the answer to, but am not sure now. Any advice would be appreciated.

I have an ISA with a current balance of £1,000 that pays 5.2% APR. This month I'm about to set up a Standing Order for £200 in to the ISA and plan to build up a lump sum so that I can pay off my loan.

Anyway, the bank just offered me a regular annual saver account for 10% APR. The woman was a bit vaugue when I tried to ask her this question, but basically I wanted to know whether I should pay the monthly £200 in to the 10% regular saving account (looks like the best yield at face value). Or, would it be better to pay it in to the ISA as originally intentended and therefore would that amount 'compound' better at 5.2% over the year (especially as there is £1000 already in there)???

Hope that makes sense ..... thanks :beer:

McSaver

Take the 10% regular saver and when it matures transfer it into your ISA since its £2,400 + a bit of interest and your limit for next year will be £3,600 so you would have plenty of room for using the regular saver. You could repeat this method every 12 months

CLAPTON

the 10% after tax is 8% APR whilst the ISA is only 5.2% APR so if you are saving for 1 year the 10% is the best deal


the advantage of the ISA is that its tax free status continues year on year whereas the 10% stops after a year.
However if you save no other money you could of course use your 'matured' regular savings to pay into your ISA next year getting the benefits of both.


If your loan allows for overpayments without penalties then it might be best to pay the money straight in there.

RayWolfe

What is the interest rate on your loan? If it's higher than the savings interest rate (after tax) then not paying that off first is the "no-brainer".

Needcash_3

Thanks all .........

Loan is 6.9% APR, but I'm not allowed to make overpayments on it, hence the additional savings. Monthly repayment on the loan is £168.54 and it currently stands at £6,910.14.

So I guess you're all suggesting that I do the 10% regular saver then, what with that, the monthly repayment and the £1,000 that I have already in the ISA, I should be able to clear it quite quickly.

I have credit card debt too, but I've just transferred that from 0% balances that are about to expire to Barclaycard for 14 months so that I can concentrate on clearing the loan

Aegis

You should transfer into a better ISA I reckon... I think Kent Reliance still have good rates for transferring across, certainly better than 5.2% (just checked, currently it's 6.05%). For a start you should definitely go there for your tax-free savings rather than the poor rate where you are.

Jonbvn

Icesave's ISA is currently paying 6.1%.