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Bank Loan

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Andy09 | 17:50 Thu 01st Mar 2012 | Business & Finance
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I have a Bank loan for which i am paying back monthly from my current account. I am shortly to receive an amount of cash from a policy that has matured. Which would be the best way to proceed, pay of the loan, with a penalty of two months interest, or put the cash in an unlimited withdrawels ISA and carry on with the monthly payments from that?

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It depends on what the interest rate is on your loan and how long you have left to pay on it
look at the rate of interest on the loan if it is greater(which I think it will be) than the interest on Cash Isa then it would be worth your while paying the debt off straight away.
If you go to the customer services counter at the bank they should be able to advise you. Or, check the interest rate and multiply. Be careful to include whether the interest is compounded monthly or annually as this may be relevant.
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Thanks for the help everyone
Depends on which is costing more, savings to be made if loan is paid off, less two months payments, (just for final settlement terms), or interest payable on the ISA.

It has to be your choice, as you have the figures, but as most ISA's pay about a max of 3-3.6%, I'd get rid of loan, then pay your loan payments into your ISA, which would boost your ISA.

This would be because you have been paying your loan, and (not?) really having too adverse an effect on your household, then by continuing with this tack, you'll still be saving for the rainy day as well.

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