Should I completely pay off my Motor Loan?

Fizman

I have a variable rate Motor Loan with BOI. Its a36 month loan, with 13 months remaining. I've roughly 5k left to pay. The monthly repayment is 280. I currently have in or about 10k in a deposit account, and I was wondering would I be better off just paying the 5k lump off? What would the pros/cons of this be? About 150 interest is added every 3 months to my loan account balance. If I pay off the loan now, will I just have to pay off the current balance a it is, or will more interest be factored in?

The fact that I haveeach of my accounts accessible online, with money transfer avilable, I am very tempted to just transfer the lot into the loan account and be done with it. I just want to know the benefits/drawbacks of doing this.

Any info/suggestions appreciated!

Supermanscat

As someone who is in a financial mess my honest advice would be to pay off the loan while you can and have the available funds. Thats where i went wrong, messing around with the available money instead of paying off the debts!!

Fizman

Supermanscat wrote: »

As someone who is in a financial mess my honest advice would be to pay off the loan while you can and have the available funds. Thats where i went wrong, messing around with the available money instead of paying off the debts!!

That is my thinking behind it. I'm 25 and on a decent wage, and have recently moved back into the family home. I've completely pissed away the bones of 15k in the past 12 months, and seriously need to get a grip of my finances. Now that I have little or no bills to worry about, the car loan is the only major monthly debit I have at the end of each month. I just want to know the pros/cons and the little details of doing so before I go ahead with it.

Mezcita

You need to clarify what rate your car loan is at and what interest rate you get from your bank.

Probable answer is that you are better off paying the loan off now as the loan rate is likely to be higher than any interest rate you would get off a bank.

Check that you will not have to pay a penalty for paying off the loan early though.

Supermanscat

Well i would't know the little details but im sure other people will when boards gets busier in the morning. I'm the same as you, ive pissed away and wasted the guts of a grand and now my hours are cut and im in 2,500 debt with banks and debt recovers on my back! Pay it while you can!! Thats my advice anyway!!

Fizman

I should have mentioned: APR is 7.9%. Rate of interest is 7.65%.

I'm going to ring the bank tomorrow to enquire if there is any penalty. If there is none, or if its not too much, I'll possibly go ahead with paying it off in the next week or so.

Does the fact that it is a variable rate loan help my cause here? I'm pretty sure I discussed this at the time with the bank and this was the reasoning behind me going with variable. I know I should have all of this off already, but 2 years ago all I seemed to care about was getting it into my account, then deal with it later.

IsThatSo?

The penalty for early repayment on a loan usually applies to fixed rate loans and not variable rate loans. I would double check though, just in case there was something in the small print that you didn't see. I would be surprised if there was a penalty for you though

KillerShamrock

Pay it off, pay it off, pay it off.
No point in having a lump in a savings account that earns like say 3% interest when your paying 7+% on a loan. What ever way you slice it your loosing money.
Your far better off with no savings and no debt, than loads of savings and loads of debt to be honest.

No penalties for clearing off a variable rate loan.
Oh and just remember each day you ponder over this the bank is adding interest. So its time you rob them of some lol

broker2008

Check if there are any penalties, get it in writing, ask for full redemption amount. Pay off in person at the bank and ask for proof that loan is fully paid off - in writing.

Fizman

I rang my branch today and have arranged to call in to them next week. I also want to sort out my deposit account, as it has recently matures and interest has gone down to 3 %. So I'll probably transfer some of the funds into a new one at 7%.

I found my original loan application form and had a quick look through it.

Under "Advance & Repayment" in the small print:
Additional for Variable Rate Loan only -
1.4 Repayments in excess of those agreed may be made, at the customers discretion, at any time during the period of the loan without additional cost.

Looks good then, but it is something I will certainly want clarification on in person.

KillerShamrock

Fizman wrote: »

I found my original loan application form and had a quick look through it.

Under "Advance & Repayment" in the small print:
Additional for Variable Rate Loan only -
1.4 Repayments in excess of those agreed may be made, at the customers discretion, at any time during the period of the loan without additional cost.

Looks good then, but it is something I will certainly want clarification on in person.

Its in print on a legal agreement signed by you and on behalf of the bank you really cant get any more clarification than that to be honest. Helped people clear many a loan in the bank and ill say for 100% you are only charged interest until the day you clear it nothing extra