# pay chunk off loan v save



## sladey (Jul 28, 2012)

Hi all

I currently have a 10k loan at 9% apr £249 a month for 4 years which I used to purchase my car

This started in Jan 2011 but its getting to the stage where Im thinking should I just try and speed it up and get rid.

I cant remember off the top of my head but I had a settlement figure last month which was just under 7k I think.

My question is, should I bother using my ISA savings to help get rid or just see it through?

I have about 4k in an ISA


----------



## CraigQQ (Jan 20, 2011)

check your loan contract to make sure theres no early repayment fees.

if there is then best to leave the money in the account and pay the monthly repayment off it.


----------



## Avanti (Jan 17, 2006)

sladey said:


> Hi all
> 
> I currently have a 10k loan at 9% apr £249 a month for 4 years which I used to purchase my car
> 
> ...


Only you can decide, I was in a similar situation with my mortgage a few years back, had savings which was earning little or no interest, the small mortgage was still costing me about £200 a year in interest, so I took the savings and cleared the mortgage, then what I was paying on the mortgage I saved 
But as the other poster suggested, make sure there are no early exit penalties. On the other hand I had some halifax shares worth £2k and a loan that was nearly £2k, had I sold the shares and cleared the loan, then I would be £2k better off now, as the halifax shares dropped to nowt, transfered to lloyds and worth must be £60 if that much


----------



## sirkuk (Mar 5, 2012)

+1 to pretty much what has already been said. If you don't need your savings or to save a little bit as a fall back then you would be better off depending on any early repayment charges.

It may be a case on your loan you can over pay up to a certain amount without incurring any charges. I know this is the case with my mortgage, which I try to do every month so I can pay my mortgage off early and to soften the blow on interest because I effectively get however many thousands added to my mortgage over the course of the year through interest.

Sent from my GT-I9300 using Tapatalk


----------



## Natalie (Jan 19, 2011)

If there are no early repayment charges I'd try and clear down the loan faster, unless you're earning more than 9% interest on your savings


----------



## Alzak (Aug 31, 2010)

For me always is better to be debt free..


----------



## sladey (Jul 28, 2012)

Alzak said:


> For me always is better to be debt free..


I know what you mean, This is my only debt so im keen to get rid of it


----------



## bigslippy (Sep 19, 2010)

Natalie said:


> If there are no early repayment charges I'd try and clear down the loan faster, unless you're earning more than 9% interest on your savings


Bang on:thumb:


----------



## Derekh929 (Aug 28, 2011)

Natalie said:


> If there are no early repayment charges I'd try and clear down the loan faster, unless you're earning more than 9% interest on your savings


But also remember many personal loans don't allow partial pay offs also sometime two months interest penalties that they sometimes don't call it a penaltie, ask for full contract details show any interest penalties, but at 9 percent and Cash Isa rates at 4 percent at best should consider after get info on penalties but good to have emergency fund as well though


----------



## sladey (Jul 28, 2012)

Derekh929 said:


> But also remember many personal loans don't allow partial pay offs also sometime two months interest penalties that they sometimes don't call it a penaltie, ask for full contract details show any interest penalties, but at 9 percent and Cash Isa rates at 4 percent at best should consider after get info on penalties but good to have emergency fund as well though


Cool thanks, I like the idea of having money aside so I'll check the loan terms first. I can comfortably pay the loan each month anyway.


----------



## bigslippy (Sep 19, 2010)

Derekh929 said:


> But also remember many personal loans don't allow partial pay offs also sometime two months interest penalties that they sometimes don't call it a penaltie, ask for full contract details show any interest penalties, but at 9 percent and Cash Isa rates at 4 percent at best should consider after get info on penalties but good to have emergency fund as well though


Where you gettin 4% Derek?


----------



## DaveDesign (May 6, 2008)

I 'think' there was a ruling past that companies must allow the customer to make overpayments penanlty free. However phoneing to settle the acount will lead to the early settlement figure route. I have been advised on my personal loan to make overpayments and allow the loan to finish on the usual DD payment. I have been making overpayments for 6 months penalty free.
If i was in your position I'd clear your debt. At the moment the debt is costing you 9% and savings only earning you 4%. Pay off the debt, then use your same monlthy figure to build up savings again. At least it wont be costing you the interest every month.:thumb:


----------



## DaveDesign (May 6, 2008)

http://www.lovemoney.com/news/credi...loans/15509/overpay-your-loan-without-penalty


----------



## tmitch45 (Jul 29, 2006)

If you are happy using a good chunk or all of your savings to pay the loan off then do it. Everything I have read on the subject say to pay off loans with savings.


----------



## sladey (Jul 28, 2012)

I think ill have a look at my terms if I can, I may see if I can double my dd so its gone in half the time


----------



## The Cueball (Feb 8, 2007)

I would say that if you can't pay the loan off 100%, then keep the money and save.... always good having a reserve "just in case"... partial repayment doesn't really help much, in the short term, unless you can lower the payments on a monthly basis... 

:thumb:


----------



## sladey (Jul 28, 2012)

Yeah I know what you mean, I wasn't sure that I was happy to clear all of my reserve fund out. It's nice to have money aside in case. Like I say, my car payment is my only debt and i made the choice to go with the bank rather than vauxhall as at least I have no restrictions on mileage and I owe vauxhall nothing.


----------



## Buck (Jan 16, 2008)

Natalie said:


> If there are no early repayment charges I'd try and clear down the loan faster, unless you're earning more than 9% interest on your savings


Exactly this.


----------

