Worth repaying this loan early?

[TameRacingDriver]

My loan is £11K over 5 years @ 2.8% and has 49 months remaining.

The monthly repayment is £196, and the total outstanding balance is £9,358.

There is a £395 loan fee which is spread over the monthlies but is payable in full if you end the loan early.

Next month I would be able to pay this off, but was wondering if there was any point in doing so, or whether I'd be best off keeping the money in the bank, as it seems to me like any remaining interest savings would be wiped out by the loan fee.

Additionally, me and MrsTRD were considering taking out a joint loan for the bathroom in the fairly near future, and I know my car is going to need some work doing at some point later in the year.

My disposable after outgoings is ~ £1400 / month so I'm not exactly broke, but things are about to get much more expensive by the looks of things.

Any thoughts? TIA

[Welshbeef]

I would say right now having more available cash is more important.

You could use it as a cushion of living cost increases?

Don’t rush the decision though.
Debt free or all debt free bar mortgage is good.


Other thought - any other debt which is a higher APR than this loan?

[timbo999]

If £9358 is the amount to settle the loan, then its actually cheaper to carry on paying it off monthly?

£196 x 49 is £9604

£9358 + £395 is £9753

What am I missing?

[Welshbeef]

timbo999 said:

If £9358 is the amount to settle the loan, then its actually cheaper to carry on paying it off monthly?

£196 x 49 is £9604

£9358 + £395 is £9753

What am I missing?

I believe he would rather have one less monthly outgoing & has the means to clear it.

[RDMcG]

Interest rates are going to rise and so is inflation.

Current rate is
ok. I would avoid bathroom loan at a much higher rate, pay cash for it and for car repair.

[TameRacingDriver]

Welshbeef said:

I would say right now having more available cash is more important.

You could use it as a cushion of living cost increases?

Don’t rush the decision though.
Debt free or all debt free bar mortgage is good.


Other thought - any other debt which is a higher APR than this loan?

Bit in bold was my thoughts.

No other debts apart from what remains of my mobile phone that I used Klarna to buy @ 0%, and that's only about £400 remaining and will expire early next year.

timbo999 said:

If £9358 is the amount to settle the loan, then its actually cheaper to carry on paying it off monthly?

£196 x 49 is £9604

£9358 + £395 is £9753

What am I missing?

Yes it would seem that way, I would have to get a settlement figure from them to confirm.

RDMcG said:

Interest rates are going to rise and so is inflation.

Current rate is
ok. I would avoid bathroom loan at a much higher rate, pay cash for it and for car repair.

To be clear, you would keep the loan going and use the spare cash for the bathroom and car?

[RDMcG]

TameRacingDriver said:

To be clear, you would keep the loan going and use the spare cash for the bathroom and car?

In my view yes. With rising interest rates in the future you have existing cheap financing and you have to spend new money now anyway to finance the other items, and doubtless if you take a loan for those items it would be at a less attractive rate. However, completely understand that this may not meet your circumstances.

[TameRacingDriver]

RDMcG said:

In my view yes. With rising interest rates in the future you have existing cheap financing and you have to spend new money now anyway to finance the other items, and doubtless if you take a loan for those items it would be at a less attractive rate. However, completely understand that this may not meet your circumstances.

Thanks, I understand the logic. The monthlies aren't breaking the bank by any stretch of the imagination and as you say the money is already there.

I think for me it was mainly about the feel good of not having that monthly payment.

[Carbon Sasquatch]

Agree with the above - that's a pretty decent rate, so if you need the money any time soon, then keep that loan going.

Only even consider paying it off it you don't need to borrow anything in the next 5 years.

[RogerDodgerSuperTodger]

Who is the loan with? Some lenders give you a ‘bonus’ at the end for having paid it all, you don't usually get this by making early repayments.

[TameRacingDriver]

RogerDodgerSuperTodger said:

Who is the loan with? Some lenders give you a ‘bonus’ at the end for having paid it all, you don't usually get this by making early repayments.

Rate Setters

I couldn't see any indication that would happen though, the narrative was very much being punished for paying it off early.

[vulture1]

I have a similar situation but it's nice having the counter balance to the loan amount sitting in the bank account. And when the loan is paid off in a 18 months it will feel like a pay rise as used to not having that money monthly.

[TameRacingDriver]

vulture1 said:

I have a similar situation but it's nice having the counter balance to the loan amount sitting in the bank account. And when the loan is paid off in a 18 months it will feel like a pay rise as used to not having that money monthly.

Aye there is that mine isn't paid until 2026!! However I reckon by then I could have saved tens of thousands of pounds, so as you say it'll be like a payrise and I'll have savings which will be nice.