What To Do

[jennyjoan]

I took a loan of £9,000 in 2013 - with interest only £1,720 has been paid to date and won't be paid off until 2018. Now I know if I pay early I will pay a penalty.

Anyway I am a position to clear this loan from an account but of course leave myself short in (that) account ie will have no intererest etc.

What would you do - pay off the loan - or keep saving with interest.

it is 5.09% paying off the loan
and 5.0 interest (gaining with the other current)

[Old_Geezer]

You are saying that you are paying a loan at 5.09% rate and have money attracting only 5% ? So you would be better off to the tune of 0.09% if you paid it off ?

Is so then it's next to no difference but I'd pay it off, provided I was sure I'd not need the money for emergencies, just to simplify the situation and cause me less stress.

That stated, the penalty you are charged can easily make a difference !

[EcclesCake]

I'd be inclined to clear the debt.

Are you sure that you have only repaid £1,720, that seems rather low this far into the term of the loan.

[Daffy6543]

I would pay it off now.

[pusskin]

Me too. Pay it off now, never have a debt laying around if poss.

[New Judge]

But before that please tell me where I can get 5% interest !!!!

[New Judge]

But meanwhile, beware that this is not as straightforward as it seems.

At present you owe £7,280. Precisely how much you will pay in interest will depend on the terms of the loan. However, assuming that you make regular monthly payments to cover the remaining loan and the interest you should pay something in the region of £700 in interest over the three remaining years, making the monthly payments around £222. (You must bear in mind that as the loan reduces the interest payable on the outstanding amount also reduces. It is not a simple linear calculation).

If you keep your money in the bank at 5% you will earn £909 net if you are a standard rate taxpayer or £1,147 if you are a non taxpayer.

You need to find out from the lender exactly how much it will cost to pay the loan off early and how much the total repayments will be if you keep the loan for the full period (you can work this out yourself if you know your monthly payments).

[EcclesCake]

As JJ is at least 18 months into the the loan I am concerned that she has misunderstood either the amount paid to date or the duration. The amount paid out and what is outstanding do not stack up in my mind.

[EcclesCake]

If the loan was £9k plus interest then things are even more awry.

[jennyjoan]

the actual interest rate on 90000 is 5.90% = made a mistake there.

[jennyjoan]

maybe this could help

Agreement opening date 4.9.2013
Duration of the Agreement 61 months
Annual Interest Rate 5.90%
Cash Loan £9,000.00
Original amount of credit £9,900.00

Am charged £43.09 interest every month and £173.76 is taken as every month ---- interest rate slightly comes down to.

I thought the amount I have paid was enough.

[jennyjoan]

sorry new Judge - (hopeless re finances) but I get my interest from the 123 Santandanter

[jennyjoan]

^^^^^^ just out of bed - original amount of cred £9,000 not £9,900 - sorry

[EcclesCake]

You are still probably better off paying off early.

Speak to them though and get a settlement figure.

I'm still from confused as to why you think you have only paid off £1,720. Could this represent the capital paid off as the interest on a loan is front loaded usually?

[jennyjoan]

eccles what do you mean front loaded -

[EcclesCake]

You pay the interest off first.

Where have you got this figure of £1,720 from?

[jennyjoan]

this is what she told me £1,720 has been paid to date . I was annoyed my self.

Unfortunately I have difficulty in understanding accents with the hearing problem but she truly said.

I have a local Sainsburys near me - could anybody there ring on behalf of me or whatever cos I do think I need to get rid of this

[EcclesCake]

JJ, you either need to ring them again or write to them. Going to a Sainsbury supermarket will not help you.

Do the sums yourself and you will see why I am querying the £1,720.

43.09+173.76=216.85

Over 20 months this comes to £4,337 - a big difference!

Check your bank statements to see what is coming out each month.

[jennyjoan]

don't need to check account it is £173.76 but I know what you are saying - will get onto somebody soon thanks for your help

[EcclesCake]

Perhaps have a word with one of the folk at the CU and see if they can clarify matters for you.

[jennyjoan]

i have sent them an email - sainsburys. will let you know what happens