Pay off loan or save?

notspending123 · 22 June 2018 at 10:00AM

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!

stevenhp1987 · 22 June 2018 at 10:12AM

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 · 22 June 2018 at 11:46AM

Pay loan quicker first then save, or you are not saving.

Herzlos · 22 June 2018 at 12:23PM

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 · 22 June 2018 at 12:37PM

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.

Pay off loan or save?

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