To tart or not?

Divorcing · 18 January 2019 at 3:28PM

Hi all

Could I get some help calculating whether it would work out better to tart some of my loan debt as I'm not very good calculating apr etc.

The loan is currently just over £6,500 with 3% APR and I'm paying just over £170/month so have just under 4 years left.

I've just balance transferred some CC debt to 0% but there is £2,500 available for money transfer with a fee of 4% so £100. I'd be able to pay this all off in the remaining 0% period.

Woild it be worth my while, ie: cheaper in the long run, for me to pay £2,500 off the loan bearing the fee in mind. I should add there a no penalties for early repayment of the loan.

Thank you for reading

D

DrEskimo · 18 January 2019 at 4:07PM

Can't quite get the numbers to work given your details (£6,500 loan with 3% APR over 4years is around £140per month), but nevertheless I think the saving works out at around £200, so even with the £100 fee for the transfer I think you will save money.

However, how mention you will be able to pay off the whole CC debt within the 0% period, so presumably this is less than the 4years that the loan has to run? In which case, your monthly amount towards debts would increase.

Could you not just direct this increase to additional monthly overpayments on your 3% loan? It's hard to know for sure without concrete numbers, but I suspect it would work out about the same net saving (i.e. saving in interest by overpaying would be equivalent to the cost of moving £2,500 to 0% CC minus the transfer fee).

foxy-stoat · 18 January 2019 at 4:13PM

I would over pay the loan rather than Money Transfer £2.5K - make the loan term shorter and you will save the most on interest.

If the loan interest rate was high single or double figures then it would be a good idea to over pay.

Divorcing · 18 January 2019 at 5:16PM

Thank you, I think increasing the loan payments is the way to go just in case of change of circumstance where I couldn't afford the fixed minimum loan payment and the what would be increased credit card payment.

enthusiasticsaver · 19 January 2019 at 8:30AM

Another vote for overpaying the loan providing there are no penalties. If you money transfer you will have the fee to pay so any savings on interest given the loan is on a low rate will be wiped out for that and should you not clear in the deal period you run the risk of it going up to a ver6 high rate if your circumstances change and you can't get another deal. I would set your credit card repayment to the right amount to clear the card within the 0% deal period and put any spare money you have towards overpaying the loan.

What makes loans expensive usually is taking them out over a long period. It is better to pay a higher monthly payment to get it cleared in as short a time period as possible. You pay less interest that way.

To tart or not?

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