Hot answers tagged

43

What nobody else mentioned yet is what you could do from now on. If you consider your current savings enough of an emergency fund, you can look into regularly overpaying your loan from now on. How much you keep in an emergency fund is your own personal choice. Typical advice is 3-6 months full expenses (rent/mortgage, bills and necessities such as food), ...


34

It sounds like you have some very real income risk, so I would not drain my savings completely just to get rid of the loan. I don't know how long £5000 would last you if you lost your job, or how long it would take to find a new job (even one way below your skills) to know how long the fund needs to last, but you could use some of it just to reduce the ...


9

"Emergency funds aren't important", eh? Let's try that on for size. Emergency funds were all the rage during the 2008-09 recession. Suze Orman, for instance, wouldn't shut up about them. In fact, she upgraded them from "3-6 month" to "6-8 month". She's probably right; millions would have had an easier time weathering that ...


5

Can you refinance? As others have said, you're on a high interest rate. If you've still got a job and a sympathetic bank you should be able to work out a new loan at a better rate. If you can consolidate a few other things as well, such as a credit card, you'll do well.


2

It is better to have a healthy amount of savings than no debt. Let's suppose you paid off that loan right now, but something bad happened tomorrow that required you to spend £1000. Instead of being able to pull that money out of savings, you would have to take out a personal loan (or put it on a credit card) at a higher interest rate than the existing loan ...


2

Is this for a home loan in the United States? In the US, ever since the Dodd-Frank act, lenders are required to verify "ability to repay" if the loan is to meet the requirements to be a qualified mortgage. If a loan meets the ability to repay and other requirements as a qualified mortgage it receives some specific protections from liability ...


2

No, you are incorrect in your reasoning. As you pay down a loan, you reduce the interest you will pay in the future. For simplicity's sake, let's assume you have two debts: A credit card debt of $30,000 which is charged 20% interest per year A mortgage loan of $300,000 which has 3% interest per year. To keep our example simple, we'll assume that you make ...


2

In general, no. The loan was made to you and you are responsible for repaying the loan. The only concern for the bank would be if you pledged the business as collateral for the loan. In that case, they might demand new collateral... though that is rare since the bank is unlikely to know how the business is doing.


2

Based on your statements, you have a combined credit card debt of 9K. You indicate you can afford to pay 0.5K/month. You indicate the "markup" (presumably, the interest) is 30% per month, meaning you have to pay 2.7K/month in interest alone. If so, you are bankrupt. You should try to earn more money, cut your other expenses, or negotiate a payment ...


2

I do not know how much 120K PKR means and how does this translates into the cost of living, so bear with me if some of my points seem to be too harsh. The standard answer is that you pay first the debt with the highest interest rate. This means that as you pay more and more the cost of your interests goes down as much as possible for the buck. To this rule ...


1

Do not make any additional debt. You have a serious financial problem now that is you cannot manage your money. With income of 120k you should be able to pay 15k debt each month. You have to list down your expense and cut unnecessary expense. Use that money to pay credit card. Wait. Is that 120k a yearly income or a monthly income?


1

Salient details to your situation: Based on your currency use you are using you are based in the UK You rent, in the centre of the city, so your rent is "quite high" You don't own a car, and most things you need are within walking distance There are a few more things to take into account: Under normal circumstances in the UK, if you are made ...


1

The wisdom that you have "frequently seen written" is in fact correct. You must pay off at least the minimum required amount on each of your loans and credit cards. If you have further surplus cash available to pay down your debts, your best option is indeed to pay off the loan with the highest interest rate. If one loan is accruing more interest ...


1

Cash in (with interest accrued) balanced against cash at end of year 10 1750000 (1 + r)^9 + 1750000 (1 + r)^8 = 247733109 ∴ r = 0.644646


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