Continue to save or pay off HP?!?!

Squirrelz92 · 18 March 2019 at 9:34PM

I am currently sitting on my house deposit of just over £18,000. I will be able to comfortably save around £600 a month which will be added to this amount reguarly.
My query is this...
I got a hire purchase out in August 2018 and as of today I have £5491.19 left to pay. It is a 60 month lease with 53 payments of £103.23 each time. The interest rate is fixed at 8.9% which means I am paying an extra £860 give or take a few quid. Do I continue to save every month and pay the minimum amount asked of every month also, or do I take their settlement figure of £4,607.15, pay it off and be debt free, allowing me to then save £703 (£600 + £103 hp) every month thereafter?
What would you do? I am in two minds and I really cannot decide. Need some advice! :j

G_M · 18 March 2019 at 10:16PM

gemmacampbell2019 wrote: »

I got a hire purchase out in August 2018 and as of today I have £5491.19 left to pay.

103.23 * 53 = £5471.19

It is a 60 month lease with 53 payments of £103.23 each time. The interest rate is fixed at 8.9% which means I am paying an extra £860 give or take a few quid. Do I continue to save every month and pay the minimum amount asked of every month also, or do I take their settlement figure of £4,607.15,
Does this include any kind of early repayment fee or suchlike?

pay it off and be debt free, allowing me to then save £703 (£600 + £103 hp) every month thereafter?
What would you do? I am in two minds and I really cannot decide. Need some advice! :j

If it is simply a comparison between
* keeping a debt at 8.9% Vs
* paying it off and losing the (1%? 1.5%?) you are currently earning on your savings
- it's a no-brainer!

Alexland · 18 March 2019 at 10:35PM

Paying 8.9% would cause me to break down and cry for a few hours. My priority would be to clear that debt first.

Squirrelz92 · 18 March 2019 at 10:40PM

G_M wrote: »

If it is simply a comparison between
* keeping a debt at 8.9% Vs
* paying it off and losing the (1%? 1.5%?) you are currently earning on your savings
- it's a no-brainer!

This is what I thought also. I just wanted clarification off other people who also think it's the best thing to do so I can grow big enough nuts to pay it! :rotfl:

Squirrelz92 · 18 March 2019 at 10:42PM

Alexland wrote: »

Paying 8.9% would cause me to break down and cry for a few hours. My priority would be to clear that debt first.

For me it didn't sound all that bad until I have sat down this evening and worked it out...
Now it sounds bad!
I guess short term pain of losing £4600 in savings is really a long term gain of being debt free and being able to then save extra pennies without needing to worry about paying off anything else.

Squirrelz92 · 18 March 2019 at 10:44PM

G_M wrote: »

If it is simply a comparison between
* keeping a debt at 8.9% Vs
* paying it off and losing the (1%? 1.5%?) you are currently earning on your savings
- it's a no-brainer!

Also, there's no purchase charge after paying the full amount...
Dare I mention that my savings account has an interest rate of 0.6%? :rotfl:
That is also another project I am working on, maximising my savings interest!

Alexland · 18 March 2019 at 10:45PM

gemmacampbell2019 wrote: »

This is what I thought also. I just wanted clarification off other people who also think it's the best thing to do so I can grow big enough nuts to pay it! :rotfl:

The £2k of LISA bonuses you are now getting in your other thread will boost your deposit back up to cover some of the £4.6k you will spend getting rid of this expensive loan. You don't want this loan hanging over you when applying for a mortgage in a few years as it will affect the affordability calculations.

Alex

Squirrelz92 · 18 March 2019 at 10:47PM

Alexland wrote: »

The £2k of LISA bonuses you are now getting in your other thread will boost your deposit back up to cover some of the £4.6k you will spend getting rid of this expensive loan. You don't want this loan hanging over you when applying for a mortgage in a few years as it will affect the affordability calculations.

Alex

Yes that is very true. I have already calculated that by removing the amount owed from the HP, if I applied for a mortgage I would be offered an additional £20k on top of the original amount which is insane! Amazing what effect a few grand of debt has on something as big as a mortgage offer.

DrEskimo · 18 March 2019 at 10:49PM

As above, pay off the debt ASAP!

I bet you are beginning to wish you just paid cash and saved the £330 odd you just gave to the finance company to borrow money you didn't need to borrow...!

Alexland · 18 March 2019 at 10:53PM

gemmacampbell2019 wrote: »

Yes that is very true. I have already calculated that by removing the amount owed from the HP, if I applied for a mortgage I would be offered an additional £20k on top of the original amount which is insane! Amazing what effect a few grand of debt has on something as big as a mortgage offer.

Many lenders have primative mortgage systems that cannot account for the fact the loan will end at a certain point and so calculate the maximum mortgage loan on the basis that the monthly loan repayments will continue for the life of the mortgage.

Alex

Squirrelz92 · 18 March 2019 at 11:10PM

DrEskimo wrote: »

As above, pay off the debt ASAP!

I bet you are beginning to wish you just paid cash and saved the £330 odd you just gave to the finance company to borrow money you didn't need to borrow...!

My circumstances in regards to my savings were different in August but yes, in theory I could have given them a larger deposit for the car, therefore reducing my hire purchase loan.
Guess I am one of those who always learns the hard way!:eek:

Continue to save or pay off HP?!?!

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