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Am I missing something?

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#1 MintyBiscuit

Posted 24 January 2013 - 11:35 AM

We have a personal loan that we're on track to have paid off by the end of May, about two years ahead of schedule. We also have a savings account for DS that is about $100 shy of the full amount owing on the loan. I'm considering using DS's money to pay off the loan immediately, freeing up $600 a month in loan repayments to pay back DS's money and avoiding another four months worth of interest. I don't know if it's just because I feel a little guilty doing this, but I feel like I'm missing something.

With the amount we're saving anyway, and the loan repayments, we'd be able to pay back his account in about two months. I'd also pay extra to make up for the loss of interest in that time - I've worked out what a year's worth of interest would be on the amount currently in there and would pay that amount in addition to what's in there now. Does it sound like paying the loan off is the smart thing to do? I'm 99.9999999% sure it is, and pretty sure it's just guilt making me second guess myself

#2 busymumof1&1/2

Posted 24 January 2013 - 11:40 AM

You are correct. It makes more financial sense to pay out the loan. Just be aware that the savings in interest may be taken away because of early release clause. Check with the financial institution for the actual payout figure, they should be able to give this to you straight away.

#3 FiFo

Posted 24 January 2013 - 11:44 AM

If I read your sig right your DS is only 1...so he is not going to know or care how much money he does or doesn't have.
DEFINITELY pay off your loan. Don't waste your money on interest if you can avoid it. It sounds like you have the perfect plan to pay back your DS's account so it will all even out and you will be better off without a debt looming over you.

Ditch the guilt and good luck

#4 MrsLexiK

Posted 24 January 2013 - 11:44 AM

Is it money you have been putting into the account? In that case I would not feel guilty at all, if it is money that he has been given I get that you may feel guilty.  I know my parents took money out of our accounts a few times to pay for things (for us) and then put it back into the account at a later stage.

Just check that you won't be penalised by the bank for paying out the loan early.

#5 PrincessPeach

Posted 24 January 2013 - 11:48 AM

Given the rate of interest you are paying & the rate of interest DS is earning, then I probably would.

Personal loan interest rates are usually sky high.

#6 Tesseract

Posted 24 January 2013 - 11:52 AM

Always pay off loans first because the interest being charged is greater than the interest you earn on a savings account. Although you may need to take into account if there are penalties for paying off your loan early.

Don't worry that it's your DS's money. If you pay it back it's no problem surely? Look at it as him lending you the money to pay the loan off, for the benefit of the whole family, then you paying him back. You could even put a little extra in for his trouble lol.

#7 MintyBiscuit

Posted 24 January 2013 - 11:54 AM

Yeah, I've checked the early release fee and it's a difference of a few dollars whether we do it now or in May as it'll still be quite early, so interest savings still well outweigh it.

Some of the money is money he's been gifted, but he is only little and the money currently going on the loan would just be going into savings, so paying him back will be quickly and easily done. And I'll be paying him back more than the interest he loses. I think the guilt is a stupid throwback to when we were kids and our savings would get raided and never ever topped back up.

Thanks everyone. The guilt is silly, and we'll all be better off with no debt hanging over our heads original.gif

#8 joy6328

Posted 24 January 2013 - 12:08 PM

Pay off the loan.
pay back your son's account.
Start a regular savings plan with the original loan payment. If you don't save it, you'll spend it original.gif

#9 (feral)epg

Posted 24 January 2013 - 12:16 PM

The only (potential) issue I see with using the money from the savings account is that it could become easy to do it again and again and just end up wasting it.  But as long as you're normally quite sensible with money and don't expect to accrue any more debt I would pay out the loan.
And then perhaps use part of the loan repayments to add to DS's savings account.

#10 beaglebaby

Posted 24 January 2013 - 07:00 PM

I think you should do it as long as you trust yourself to repay the money.  If you're going to be making regular deposits to repay it to DS look at opening the Bankwest kids saver account, I think it is currently paying 8% interest on amounts up to $250 a month deposited.  It only lets you get the balance up to $3k over 12 months then moves it to a standard savings account and starts again, but it's the best interest rate anywhere on savings.

#11 MintyBiscuit

Posted 26 January 2013 - 09:50 PM

QUOTE (beaglebaby @ 24/01/2013, 08:00 PM) <{POST_SNAPBACK}>
I think you should do it as long as you trust yourself to repay the money.  If you're going to be making regular deposits to repay it to DS look at opening the Bankwest kids saver account, I think it is currently paying 8% interest on amounts up to $250 a month deposited.  It only lets you get the balance up to $3k over 12 months then moves it to a standard savings account and starts again, but it's the best interest rate anywhere on savings.

We did it, and have sat down and plotted out the payback plan including taking lost interest into account, so I'm happy.

That account sounds great, will have a look into it.

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