Manageable debt - but shall I get rid of it just because I can?

Scubajay

Hello all,
Following on from advice I have found on here before I thought I would come back as you all helped me out of the hole before.

I took a loan out on a car I needed to buy, and made the term of it quite short because I could afford large monthly payments of £380 a month for 2 years to pay it off. I now have about £3500 left to pay which will take until next September, and coincidentally I also have £3700 in my ISA:j

Now If I pay off the loan I can recover the savings quite quickly as I will be able to save a load more whilst also having a bit more walking around money....and then the loan will be gone, even though it is not killing me to make the payments.

Is the sensible thing to get rid of it? I don't plan to save millions of pounds for my dotage as I will to be old to enjoy my hobbies when I retire so my job pension will support me. and I live a "live for the now, but within financial limits" lifestyle.

devonsdreamer

From what I have read previously I would guess paying the loan whilst you can would be the best option then putting both the loan payment amount and what you currently save into the isa at least untill the loan "would have been paid"

I guess the questions I would be asking myself would be:

How much interesting am I gaining on my savings compared to the cost of the interest on the loan

If i settle early will I have to pay a early settlement charge or will the settlement be less due to recalculation of interest.

Do I want to worry about what may happen or clear a debt whilst I can - an be in stronger saving position

Good luck with whatever you decide

duchy

Agreed-whatever means you make the most from the money so compare interest you will save by clearing the loan early versus what that money would have earned for you in a savings account.

doodledo_2

duchy wrote: »

Agreed-whatever means you make the most from the money so compare interest you will save by clearing the loan early versus what that money would have earned for you in a savings account.

Exactly what I was going to say.

unhappybuuny79

Personally, i would pay the debt off. I know there is a possibility of making more money by keeping the savings, but i always think, What if i get run over by a bus tomorrow?

With the debt clear you can save both amounts (what you were paying to the loan and what you were already putting into your savings) so like you say your savings will be back to normal in no time.

A clear deb is a better position to be in if you should want to get credit at a later date. You should however consider the early get out clause and the time frame.

OberonSH

Agreed - check the penalties for early payoff. Can make it unviable.