What to do

markwilliams82

Hey everyone, my current situation is that I have a £16k loan, which has until November 2010 to be repaid with Nationwide. With this loan I am paying £312 a month and have since cancelled my loan protection. My current settlement figure for my loan is £8557

I have a savings account with HSBC and I have £5450 at the moment. I've been working hard to repay this loan as soon as I can but I had a car accident earlier this year which took a £1000 dent out of my savings and along the way obvious other little things have popped up.

I'm currently able to save roughly £300 - £360 a month.

I have been with my partner now for 3 years and we are very serious about moving out in a year or so. Which for this I obviously need a big deposit.

For this I need someones help as I have two ideas swimming around in my head for paying off my loan. For both ideas I've done some working out and will explain briefly;

1st Option - with my current loan repayments and my current rate of savings I should have my loan repaid in full by the end of October this year. Meaning that I will be able to save near £700 a month for moving out (based on this, and for example moving out next September, I'll have £7000 saved up)

2nd Option - get a £3000 over 3 years to settle my £16k loan now. This would then free up more money to start to save towards a deposit right away. The repayments on a loan like this would be £110 with HSBC (the only place I can get a loan at the moment) meaning that with my £16k loan settled I'll be able to save £600 a month (based on this, and for example moving out next September, I'll have £9000 saved up)

I know things will pop up along the way effecting the overall amount I'll have saved up but I'm using those figures as a rough guide, and I know the rule of not getting a loan to settle a loan but obviously I'm trying to think about my future savings for moving out.

I'd love to hear some peoples opinions and advice, if you need any more information please ask I will gladly help as I am really confused and loosing sleep over my situation at the moment

tealady

If you look you are most probably getting less interest on your savings than you are paying on your debt. So you are paying the bank to lend THEM money.
Use your savings to apy off your loan as quickly as possible (unless there are early redemption charges, then start saving.

jopwo_87

I dont know much about this, but I would have thought that the interest rates on savings were always going to be less than the interest rates on borrowing. So i would go with option 1.

markwilliams82

Yeah. I did prefer option 2 at first but the more I thought about it the less I was keen and always got upset about it when I'm so close to replaying my major loan.

With the savings I've built up, where would the best place to put them for a higher interest? I've currently got them in my HSBC Online Saver account.

tealady

Try an ISA, you won't pay tax on it.