Shall I move my loan?

mwilde

I got a £5000 loan in November 2006 over 5 years with moneybackbank.co.uk @ 5.7% as recommended by this site. I got no insurance and im paying £95.50 a month. The last payment will be in November 2011.


I estimate that total I will pay back is £5,758.08. As I have made 15 payments already of £95.50 I think I should owe £4325.58.


I’m thinking of reducing the years, but I have to take a new loan out to do this. The problem is the cheapest loan for over £4000 is Barclay Card @ 6.8%. If I got a £4000 loan for 18 months @ £234.09 (which is the most I could possible pay a month – and would probably be stretching myself) I would pay the loan off in 18 months instead of the remaining 45 months of the current loan.

Is this worth doing? How much cash would I save? Or is the increased interest rate going to make it not worth moving the loan?

jonesMUFCforever

I think your calculations are a bit wrong.
Interest is calculated daily and applied monthly , so as you owe more at the start of a loan the monthly interest will be greater than in last few months.
Therefore your amount owing will be more than the £4325 you think you owe. On top of this will there be an early settlement fee?

To be honest you have got one hell of a good rate and I would think twice before getting rid.
What I would do is ask the lender whether they accept overpayments - if so get the details and send them as much money as you can when you can. Whilst this will not reduce your monthly payment it will greatly reduce the amount of interest charged and therefore the amount of months left to pay.

If they don't allow overpayments then set up a savings account to save until your 'pot' equals what is left on the loan and then pay it off.

mwilde

They dont accept overpayments. I asked them and they said the only way i could reduce the term would be to settle the loan, and start a new loan. But the new loan is of a higher intrest rate.

I think i might do start the savings then. At least this will make sure i can afford it without taking the risk.

Thanks

asandwhen

Open a regular saver account I think some banks are doing this at around 8%apr the most you can save is £250 a month - pay the extra you want to pay off each month into your regular saver account then when you have enough pay it off.

CLAPTON

your current debt after 15 payments is around £3,900 and they can add two month interest for early settlement, so a settlement figure would be under £4,000

if you simply save up the difference between 234 and your 95 payment (i.e. 139) per month
you would save 2500 (plus interest ) in about 18months... which would then be about the settlement figure.

UK007BullDog

I definately support what you have been told here. As any new loan at this time of the credit crunch will have a higher interest rate it is best to save up and then ask for a settlement figure on your loan in about 2 years time and see if your savings are equal to or more to your loan. Then pay it off.

mwilde

Thank you everyone. I really appreciate your help and advice.

prophecy_grrl

hi mwilde

i have opened a savings account and put our extra money in, as early settlement would cost too much.

jonesMUFCforever - i didn't think about enquiring re: possible overpayemts, but will definitley call the loan ppl this week