Is overpaying the best option

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LeeMcD
LeeMcD Posts: 3 Newbie
in Loans
Hi all,

I currently have a HSBC Personal Loan which I pay 420.00 a month, I'm currently overpaying monthly an additional £440.00, in the long run I would like to clear the loan down a little , then top it up to purchase a new car in a year or so.

I've noticed that the amount that I save "the interest rebate" drops quite a bit each month, as I take it this is based upon a saving spread across how many payments i have left.

As I will eventually look to top this loan up/ clear via another provider, would I be best not to make the over payments, and gain the most of the final interest saving,

Many thanks
Lee

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  • [Deleted User]
    [Deleted User] Posts: 35,242 Forumite
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    It depends on your APR and whether you're earning more in savings, If not, keep overpaying.

    If you think it may be problematic applying for a new loan, you may be best off building your savings so you won't need to borrow again.
  • foxy-stoat
    foxy-stoat Posts: 6,879 Forumite
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    No point in overpaying if you intend on taking out another loan - unless your interest rate is high. Just save the £440 a month and borrow less money when you want your new car.
  • LeeMcD
    LeeMcD Posts: 3 Newbie
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    Thanks, I can't see me having any problems getting another loan in the future, its my only debt/loan that I use to replace my car every two - three years.

    I'll just start to put it away, as you say less to borrow in the future.
  • enthusiasticsaver
    enthusiasticsaver Posts: 15,595 Ambassador
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    What interest rate are you paying on the loan?
    I’m a Forum Ambassador and I support the Forum Team on the Debt free Wannabe, Budgeting and Banking and Savings and Investment boards. If you need any help on these boards, do let me know. Please note that Ambassadors are not moderators. Any posts you spot in breach of the Forum Rules should be reported via the report button, or by emailing forumteam@moneysavingexpert.com. All views are my own and not the official line of MoneySavingExpert.
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