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    • Poppy1984
    • By Poppy1984 17th May 19, 10:26 AM
    • 203Posts
    • 440Thanks
    Poppy1984
    Advice on overpaying a loan
    • #1
    • 17th May 19, 10:26 AM
    Advice on overpaying a loan 17th May 19 at 10:26 AM
    Hi, I'm just looking for a bit of advice regarding overpaying a loan. I have a loan with Halifax that currently stands at 21,000 with 63 months term remaining. I am in a position where I can start overpaying the loan by approximately 200 a month.

    When discussing this with someone close to me they suggested I would be better off putting the 200 a month into a savings account monthly until I had around 1,000 - 1,500 lump sum then paying that off the loan in one go. I'm unsure about this because I've been using loan overpayment calculators and if I over pay I'll save x amount of interest etc.

    I'm getting myself in a muddle trying to work out how much interest earned by saving and paying off a chunk and interest saved by regular overpayments.

    Any advice would be welcomed
    19-02-18 Total Debt 4,015 Next 815 Very 1600 Tesco Credit Card 1600
    PAID Next 815/815 now closed Very 1600/ 1600 now closed
    Tesco 1,600/ 1600
    now closed
    Emergency Fund 300/300
Page 1
    • pab233
    • By pab233 17th May 19, 11:55 AM
    • 28 Posts
    • 95 Thanks
    pab233
    • #2
    • 17th May 19, 11:55 AM
    • #2
    • 17th May 19, 11:55 AM
    I think it would only be worth saving a lump sum if the interest gained on that lump sum would be more than the interest you were charged on the loan over the same period. Then you would potentially make a small profit.
    However, since interest on savings at the moment is very low, and almost certainly less than you would be paying on a loan, I think that over-paying the loan would be a better idea, especially if interest is charged daily.
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    • Poppy1984
    • By Poppy1984 17th May 19, 12:31 PM
    • 203 Posts
    • 440 Thanks
    Poppy1984
    • #3
    • 17th May 19, 12:31 PM
    • #3
    • 17th May 19, 12:31 PM
    Thank you, I thought that was the right path to go down but wanted a second opinion
    19-02-18 Total Debt 4,015 Next 815 Very 1600 Tesco Credit Card 1600
    PAID Next 815/815 now closed Very 1600/ 1600 now closed
    Tesco 1,600/ 1600
    now closed
    Emergency Fund 300/300
    • Kitten868
    • By Kitten868 17th May 19, 12:43 PM
    • 1,201 Posts
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    Kitten868
    • #4
    • 17th May 19, 12:43 PM
    • #4
    • 17th May 19, 12:43 PM
    I would focus on how it's going to be more effective for you. For me overpaying would be better as I would see the savings as an emergency fund but the loan that money is gone. Are you better with savings or overpaying?

    You could pay 5 a day if that's how you wanted to do it. Halifax don't have restrictions on it.
    Loan 1 4900/8000
    Loan 2 2900/5800
    Total 7800/13800 43% PAID

    And CC 1250/1900
    • Poppy1984
    • By Poppy1984 17th May 19, 12:56 PM
    • 203 Posts
    • 440 Thanks
    Poppy1984
    • #5
    • 17th May 19, 12:56 PM
    • #5
    • 17th May 19, 12:56 PM
    I have a separate emergency fund, I think saving it and paying it off as a lump sum would be too tempted to dip into it.
    19-02-18 Total Debt 4,015 Next 815 Very 1600 Tesco Credit Card 1600
    PAID Next 815/815 now closed Very 1600/ 1600 now closed
    Tesco 1,600/ 1600
    now closed
    Emergency Fund 300/300
    • db2016
    • By db2016 19th May 19, 2:27 PM
    • 98 Posts
    • 266 Thanks
    db2016
    • #6
    • 19th May 19, 2:27 PM
    • #6
    • 19th May 19, 2:27 PM
    simple maths really, as someones said.



    savings wouldnt EARN what the loan is COSTING, in interest, so just pay off extra as and when you want, assuming no penalties etc.
    • Poppy1984
    • By Poppy1984 20th May 19, 12:02 PM
    • 203 Posts
    • 440 Thanks
    Poppy1984
    • #7
    • 20th May 19, 12:02 PM
    • #7
    • 20th May 19, 12:02 PM
    Perfect thanks all, going to make my first overpayment on the 14th of next month excited lol
    19-02-18 Total Debt 4,015 Next 815 Very 1600 Tesco Credit Card 1600
    PAID Next 815/815 now closed Very 1600/ 1600 now closed
    Tesco 1,600/ 1600
    now closed
    Emergency Fund 300/300
    • enthusiasticsaver
    • By enthusiasticsaver 20th May 19, 8:39 PM
    • 8,471 Posts
    • 19,556 Thanks
    enthusiasticsaver
    • #8
    • 20th May 19, 8:39 PM
    • #8
    • 20th May 19, 8:39 PM
    I agree that overpaying the loan seems the best thing to do. I cannot see any advantage in saving up and paying in one lump sum as most loans charge interest daily now and are almost certainly higher interest than you will get in savings interest.
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