Debt Or Pre-Pay Expenses?

Pho3nix

Pho3nix

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Hi guys,

Looking to do one of two things, namely pre-pay some of my set-amount expenses ala internet, levies (averaged amount) and insurance for the year or rather gooi everything into my house or car?
Thought process is surplus from not having to pay those other things can be payed into the homeloan rather. Car interest is pre-calculated for the term so.. yeah :|

Interest on house is prime -x.

Anyone done something similar or have some advice before I go the strippers and blow route? :p
 
Lump sums are great for making a dent in debt. Ask yourself this: What are you gaining by not paying off debt?

Unless you are given a discount for pre-paying (eg. 12th month free) it makes no sense since you are paying off what can be seen as similar to an "interest free loan". Why give them your money to gain interest on instead of you?

Paying debt off earlier means you gain on interest savings and usually more than interedt in any savings account will give you.
 
Hamster said:
Lump sums are great for making a dent in debt. Ask yourself this: What are you gaining by not paying off debt?

Unless you are given a discount for pre-paying (eg. 12th month free) it makes no sense since you are paying off what can be seen as similar to an "interest free loan". Why give them your money to gain interest on instead of you?

Paying debt off earlier means you gain on interest savings and usually more than interedt in any savings account will give you.
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Honestly.. less things to worry about for a couple of months. Medical expenses put a dent in my medical aid already and need some breathing room since I’ve started butchering my emergency cash for medical expenses.

I do get your point though and where possible excess will be paid into loan accounts after month 3 or 4. Just need to get my savings kitty back to a decent number and squash some expenses/luxuries.
 
Snyper564 said:
Such a big mistake not having the access bond mmaybe check that's the Best place for any extra money
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Agh, just wanted a house, can always get it though. Can always put the money into my bond and use that as a savings account.. but Tyme banks 9%.

Will call bank and see if any fees in converting.
 
Pho3nix said:
Agh, just wanted a house, can always get it though. Can always put the money into my bond and use that as a savings account.. but Tyme banks 9%.

Will call bank and see if any fees in converting.
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Do that. The flexi bond is a way better option
 
supersunbird said:
Is this really so? What is this type of loan called?
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So the total I see on my internet banking I what I need to pay. Amount doesn’t change as interest is already applied.

If I pay in more, I pay into the capital amount decreasing the total or decrease the installment VS HL where the amount in your internet banking is your current total and monthly interest gets added.
 
Pho3nix said:
So the total I see on my internet banking I what I need to pay. Amount doesn’t change as interest is already applied.

If I pay in more, I pay into the capital amount decreasing the total or decrease the installment VS HL where the amount in your internet banking is your current total and monthly interest gets added.
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I think maybe you are falling for the "projected value" is what you will pay trap. If you pay in more, you will pay less interest.

I'd say pay it into the loan with the highest interest rate.
 
Pho3nix said:
. Car interest is pre-calculated for the term so.. yeah :|
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If you have a significant amount of money just laying around you can pay it into your car loan, call up the bank, tell them to capitalise that amount and decrease yout term(or instalments) saving you the interests. You just can't get the money out again like with a access bond.
 
Pho3nix said:
Honestly.. less things to worry about for a couple of months. Medical expenses put a dent in my medical aid already and need some breathing room since I’ve started butchering my emergency cash for medical expenses.

I do get your point though and where possible excess will be paid into loan accounts after month 3 or 4. Just need to get my savings kitty back to a decent number and squash some expenses/luxuries.
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Problem is, if you pay off all your medical aid or whatever until the end of the year you might become accustomed to the extra moola every month and be in for a "shock" when you have to start making payments again.

You have X amount of money coming in every month
You have Y amount of money going out (expenses to live... OPEX in business terms).
You have Z amount left to do whatever you want with.

Why upset this balance and make your financial life more complicated? In my mind you want it to be as consistent as possible so you can plan/forecast better.
 
Put the money towards anything that bares interest otherwise you are just playing a losing game.

You'll come worse off in the longer term for pre-paying stuff you need to pay anyway.

Not to mention those things that you pay monthly can earn you rewards in other ways (like eBUcks etc) which you can't get if you pay up front.

******

Car interest might be pre-calculated for the term but you can either have it re-calculated based on the capital balance changing or simply change the payment term by pre-loading it and settling it early.

Interest rate is pre-calculated but interest itself is calculated daily on the outstanding contract balance. So if you rate is 10% and you put 10k into your car you'll save R83 per month.

If you settle it early you can then of course not have that expense at all and shorten the loan term considerably and save yourself thousands.

In effect you reduce the interest rate overall.

They rebate you monthly for any excess money sitting there.

Question is rather home or car which comes down to which ones interest is higher and then how accessible the money should be.
 
Pho3nix said:
Honestly.. less things to worry about for a couple of months. Medical expenses put a dent in my medical aid already and need some breathing room since I’ve started butchering my emergency cash for medical expenses.

I do get your point though and where possible excess will be paid into loan accounts after month 3 or 4. Just need to get my savings kitty back to a decent number and squash some expenses/luxuries.
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So make your Home Loan your own Medical Savings Account and use a spreadsheet.

That's what I do.

Score on interest and also score some money from whoever the Medical Aid thieves are who charge you more than they should.
 
Pho3nix said:
Don’t think so... think it’s a bog standard HL
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This always worries me.

This is something you should KNOW.

How old is the home loan? And with who? It's very rare to get a new one that isn't an access bond.
 
SauRoNZA said:
This always worries me.

This is something you should KNOW.

How old is the home loan? And with who? It's very rare to get a new one that isn't an access bond.
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2 years this year. Blue bank. Already mailed my banker and about it
 
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