We’d like to remind Forumites to please avoid political debate on the Forum.

This is to keep it a safe and useful space for MoneySaving discussions. Threads that are – or become – political in nature may be removed in line with the Forum’s rules. Thank you for your understanding.

📨 Have you signed up to the Forum's new Email Digest yet? Get a selection of trending threads sent straight to your inbox daily, weekly or monthly!
The Forum now has a brand new text editor, adding a bunch of handy features to use when creating posts. Read more in our how-to guide

Pay off loan or save?

notspending123
notspending123 Posts: 5 Forumite
in Loans
Hi All!

I have a 60 month loan, which I am paying back in monthly installments. I have 56 payments left.

But I do not have any savings.

I want to be debt free but I am desperate to get some savings behind me and I would love to buy a house.

So my question is - with my pay after bills and loan payment has gone out, do I save or do I pay off the loan quicker?

There is no penalty for me paying off the loan quicker.

Please advise, thank you!

Comments

  • stevenhp1987
    stevenhp1987 Posts: 907 Forumite
    Part of the Furniture
    What is the interest rate on the loan?

    You'd be hard to beat the interest rate with savings. Have a small amount aside for emergencies and pay it off. Once paid off, use the money you were putting towards it for savings towards a house deposit.
  • foxy-stoat
    foxy-stoat Posts: 6,879 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper
    Pay loan quicker first then save, or you are not saving.
  • Herzlos
    Herzlos Posts: 16,305 Forumite
    Part of the Furniture 10,000 Posts Photogenic Name Dropper
    You're going to be paying a lot more in interest on the loan than you'd get from saving, but you want to have some savings.


    So maybe build up a months worth of salary as savings for the rainy day, and then put the rest into overpaying the loan.


    4 months into a 5 year loan means you'll save plenty on interest for any early repayments.
  • letitbe90
    letitbe90 Posts: 345 Forumite
    Save enough to act as an emergy fund, then pay it off. Depending on your situation, it could be anything around £10,000. Life can bring suprirses so don't end up with no savings.

    I'd also say a months worth of salary is not much, ideally 6 months but at a minimum 3 months if you ask me.
This discussion has been closed.
★ ★ ★ Meet your Ambassadors

🚀 Getting Started

Hi new member!

Our Getting Started Guide will help you get the most out of the Forum

Categories

  • All Categories
  • 353.6K Banking & Borrowing
  • 254.2K Reduce Debt & Boost Income
  • 455.1K Spending & Discounts
  • 246.6K Work, Benefits & Business
  • 603K Mortgages, Homes & Bills
  • 178.1K Life & Family
  • 260.7K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 16K Discuss & Feedback
  • 37.7K Read-Only Boards

Is this how you want to be seen?

We see you are using a default avatar. It takes only a few seconds to pick a picture.
Update Your Picture