# Use Savings to Pay off Credit Union Loan?



## Siobhan1 (9 Sep 2009)

Have €10,000 in savings and a credit union loan with €6000 remaining.  Is it wise to pay of the loan using my saving or as I keep hearing these days "cash is king!".  Its not a struggle at the moment to pay the loan repayments but It will be 2 years before I have it paid completely.  Any advice or suggestions would be appreciated.


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## Guest116 (9 Sep 2009)

what rates of interest are on the savings versus the loan?


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## Siobhan1 (9 Sep 2009)

At work at moment so don't have know off hand what rates are but would imagine paying higher interest rate on loan than getting on savings.  I'm worried that if I pay off loan using savings that I will lose my safety net - does that make sense?  Or what if I needed to take out another loan then within the next year or so and no bank willing to lend to me?


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## Guest116 (9 Sep 2009)

Always good to have savings set aside for the reasons you mention.

As the amounts you are talking about are not massive the interest rates probably dont matter that much.

I would not pay off the loan yet, I would keep the savings.


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## griswold (9 Sep 2009)

Crazy in my view.
Assuming 7% interest rate on your loan of 6000, you'll be paying about 800 in interest over the next 2 years that you dont need to pay.
I'd rather the 800 euro.


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## Guest116 (10 Sep 2009)

You have to account for the interest that could be earned by having that 6000 in savings so the difference is about 265 per year.

So the OP needs to decide how to balance that against the need to have a good chunk of savings if it is needed for any reason.


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## galway. (10 Sep 2009)

is there a fee to clear the loan also???


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## becky (10 Sep 2009)

I paid a cr. union loan off a year early (not from my shares) and did not have to pay a fee.


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## birdy (10 Sep 2009)

Why not pay off the loan in a lump sum, then put the sum that the loan was every month towards your savings, as you said its not a struggle at the moment, so there would be no change in your outgoings


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## cnu (10 Sep 2009)

I'd put the 10K in fixed deposit [with an option of anytime withdrawl].  This way you are still king of cash  and the interest you get in FD hopefully lessens the burden on remaining 6K loan. 

I'd even go further of depositing for 3 yrs (if I get better interest) and try to save bits-n-bobs to narrow the difference.


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## so-crates (10 Sep 2009)

Why not go halves on the thing. If you can, pay half the loan off from your savings and then pay the remainder off over the year on the normal repayment schedule. You'll clear it earlier, pay slightly less interest and retain a larger amount of savings.


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## Siobhan1 (10 Sep 2009)

Thanks all for the replies.  Think what I'm gonna do now is keep the €10,000 til after Christmas anyway and between now and then get few grand paid off loan.  Depending on December budget etc will then maybe pay of the balance if possible.  I like to have the savings in the event of myself or husband losing our jobs - at least I would have enough set aside to pay mortgage.

Thanks again guys.


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