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are you better off to have savings or a loan?

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  • 26-07-2014 12:50pm
    #1
    Dr Nic
    Closed Accounts Posts: 1,323 ✭✭✭


    Hi there
    I have a loan for 47k paying 5.088‰ interest. I have about 10k in savings lying in a standard Aib current account...

    Would it be worth my while to put maybe 5 or 6k into the loan and try get the repayments down as much as I can or can I just let it go. Repayments are 644 per month and not really hurting me. I'm taking home about 1300/1400 a fortnight after tax from work...

    I really should be better with money but I buy a lot of crap as we all do I suppose!
    Thanks


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    #2
    Nervous Wreck
    Closed Accounts Posts: 16,115 ✭✭✭✭Nervous Wreck


    If you're gonna lodge the 5k to the loan and the repayments aren't hurting you, you're probably better off shortening the term rather than lowering the repayments. Shorter term = less interest accrued, essentially saving you a little money.


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    #3
    GerardKeating
    Registered Users Posts: 7,652 ✭✭✭GerardKeating


    Dr Nic wrote: »
    Hi there
    I have a loan for 47k paying 5.088‰ interest. I have about 10k in savings lying in a standard Aib current account...

    Would it be worth my while to put maybe 5 or 6k into the loan and try get the repayments down as much as I can or can I just let it go. Repayments are 644 per month and not really hurting me. I'm taking home about 1300/1400 a fortnight after tax from work...

    I really should be better with money but I buy a lot of crap as we all do I suppose!
    Thanks

    Depends on the loan, it is a variable rate loan, or Fixed Rate? Many/Most fixed rate loans have penalties for paying the off early.

    If there are no penalties, the reduce the outstanding amount, otherwise consider moving it to some form of long time savings account and earn some interest on it.


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    #4
    SBarrett
    Registered Users Posts: 160 ✭✭SBarrett


    Do you have an emergency fund? If the 10k is your emergency fund, I wouldn't put any of it into paying down a loan but I would put it into something that will pay you some interest.

    If you need less than 10k for your emergency fund, then consider putting the surplus against the loan.

    Would I be correct in saying you have 8 year and 3 months left on your loan? Putting 5k against the loan will reduce the term to 7 years and 4 months.

    Of course, if it's at a fixed rate, there's no point as you'll be penalised if you pay off the loan early.


    Steven


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    #5
    CIARAN_BOYLE
    Registered Users Posts: 14,599 ✭✭✭✭CIARAN_BOYLE


    Assuming that there are no penalties for paying off early dropping 5k into the loan will save you about 250 a year in interest if you keep repayments the same. Over the length of the loan that is about a grand and a half.weigh that up against your need for an emergency fund and make a decision.


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    #6
    SBarrett
    Registered Users Posts: 160 ✭✭SBarrett


    The thing with having an emergency fund is that you don't know what you will need it for. On my way home from work on Friday, a warning light went off in my car so I stopped off at my mechanics. I now have to spend a grand in getting the car fixed, something I will pay for out of my emergency fund instead of paying for it on my credit card at 23% APR.


    Steven


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    #7
    Dr Nic
    Closed Accounts Posts: 1,323 ✭✭✭Dr Nic


    Thanks!
    Any advice on a long term savers account?

    I don't think I get penalised for paying back early . maybe 3 or 4k into the loan keeping 3k for a rainy day and 3 or 4k into a savers account is the best bet

    I fecking hate having a loan. Always did. I hate seeing the interest going out...


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    #8
    Mezcita
    Registered Users Posts: 2,328 ✭✭✭Mezcita


    Dr Nic wrote: »
    Thanks!
    Any advice on a long term savers account?

    I don't think I get penalised for paying back early . maybe 3 or 4k into the loan keeping 3k for a rainy day and 3 or 4k into a savers account is the best bet

    I fecking hate having a loan. Always did. I hate seeing the interest going out...

    http://www.moneyguideireland.com/best-savings-rates

    Although personally I would pay as much as possible from the loan as quickly as you can. Interest rates are awful at the moment, especially when you factor in the that you pay DIRT on the interest.


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