Bounce Back Loan - Are You Making the Most of It?

When repayment started on Bounce Back loans after the first 12-month interest only period, the repayment period defaulted to 5 years.  You have the option at any time to repay over 9 years the difference is £920 vs £550 per month, a difference of £370/month or £4400 pa.

Most people opted to repay as quickly as possible, but why?  It was the default option if you did nothing!  Its interest rate is fixed at 2.5% which is 0.25% behind a rapidly increasing Base rate of 2.25% and deposit interest rates (e.g. Oxbury 2.25% - 3.9% 1 year fixed) are also increasing.

If you borrow money on an overdraft at 6.5% (Base plus 2.5% min plus 1% arrangement fee) this is nearly three times the overdraft rate which is variable and likely to increase again by end of 2022.

The only reason to repay the Bounce Back loan as quickly as possible is if you have money in credit or on deposit earning less than 2.25%.  Why payback an extra £370 per month to save 2.25% interest to end up paying 6.5-7% interest and fees on it?

Log in online to your bank account and reset the repayment period to nine years at the stroke of a few buttons.  When you win the lottery or the account is permanently in credit, you can increase the payments or clear the debt completely.  It should be the last debt you clear as it is the cheapest!

For an independent overview of your business finances contact Gerard on 07976 426420 or e-mail gerardfinnan@fcgagric.com to suggest improvements to your business.