Discussion
Hello all
Forgive me if I'm in the wrong area.
I've had a bank loan for a year now, I took it out when my credit rating was pretty poor but it was emergency circumstances. Since then I've not missed a payment but I'm paying quite a high interest rate. In the last year I've gotten myself a good job and cleared most of my debts however now im left wondering if I can do something about my existing loan.
This may seem dumb, but let's say my settlement figure is 5k, would it be advisable for me to take out a new loan for 5k, at a lower duration, with a MUCH lower interest rate and pay off the existing loan?
Sorry if I'm being daft. I really have no clue.
Forgive me if I'm in the wrong area.
I've had a bank loan for a year now, I took it out when my credit rating was pretty poor but it was emergency circumstances. Since then I've not missed a payment but I'm paying quite a high interest rate. In the last year I've gotten myself a good job and cleared most of my debts however now im left wondering if I can do something about my existing loan.
This may seem dumb, but let's say my settlement figure is 5k, would it be advisable for me to take out a new loan for 5k, at a lower duration, with a MUCH lower interest rate and pay off the existing loan?
Sorry if I'm being daft. I really have no clue.
Calculate what you'd pay to finish the current loan. Then calculate the total cost of a new loan at a lower rate. If the other loan nets out with a lower overall cost then go for it. Be sure to mind the early repayment penalties that will likely exist on the current loan.
Also, bear in mind that making lots of loan requests will adversely affect your credit score...which sounds like it's had a rough time to date.
Also, bear in mind that making lots of loan requests will adversely affect your credit score...which sounds like it's had a rough time to date.
Can be a sensible move IF you can get a loan at the advertised rate. The rate offered can be different to the headline rate due to your personal circumstances so best get a quote and see.
But it's a no brainer if you have for example £5k left and say 18 months left on a loan at 20% and replace it with a £5k loan with the same duration (18 months) at 5%.
Or you may chuck it on a 0% credit card and repay it within the offer period.(If you can get one with the balance needed that is!)
But it's a no brainer if you have for example £5k left and say 18 months left on a loan at 20% and replace it with a £5k loan with the same duration (18 months) at 5%.
Or you may chuck it on a 0% credit card and repay it within the offer period.(If you can get one with the balance needed that is!)
Cheers guys.
The current loan still has almost 4 years to go. And the exact figure I believe is 6.3k remaining. Not accounting for interest. This is the remainder of the amount I borrowed.
A new loan I checked was 6.5k @ 4% for 36 months.
I've just never heard of people doing this so I wanted to see if I was into something here.
The current loan still has almost 4 years to go. And the exact figure I believe is 6.3k remaining. Not accounting for interest. This is the remainder of the amount I borrowed.
A new loan I checked was 6.5k @ 4% for 36 months.
I've just never heard of people doing this so I wanted to see if I was into something here.
You need to speak to your existing lender and request a settlement figure.
Being one year into your loan you will almost certainly paid mostly interest up until now. You will have paid almost none of the capital.
They arranged like this so if you pay it off early, they still earn nearly all the interest. Bankers eh!
Being one year into your loan you will almost certainly paid mostly interest up until now. You will have paid almost none of the capital.
They arranged like this so if you pay it off early, they still earn nearly all the interest. Bankers eh!
kentmotorcompany said:
You need to speak to your existing lender and request a settlement figure.
Being one year into your loan you will almost certainly paid mostly interest up until now. You will have paid almost none of the capital.
They arranged like this so if you pay it off early, they still earn nearly all the interest. Bankers eh!
First bit right, rest of this post probably not.Being one year into your loan you will almost certainly paid mostly interest up until now. You will have paid almost none of the capital.
They arranged like this so if you pay it off early, they still earn nearly all the interest. Bankers eh!
Get a settlement figure and work it out from there. If you're not confident with the maths then post the figures up here to get some help
4 or 5 years ago I paid off a NatWest loan early, the settlement charge was 2 months (or possibly 56 days) interest; if the saving on the new loan rate (as mentioned above, you may not get the advertised rate, they just have to make sure at least 51% of applicants get the advertised rate) outweighs the settlement charge on the existing loan, go for it.
Thanks guys. Really helpful advice here.
I've actually paid a fair bit capital off as the balance has gone down.
Here's a breakdown though. I borrowed 8k at a rate of 19.9%. Extortionate I know. It's been exactly a year into it with repayments at 167 a month, for 4 more years.
I'm thinking to borrow the same amount from tesco at 4.3% to settle the loan. However I'm sure that I won't get that rate, maybe around 10-11%.
I've actually paid a fair bit capital off as the balance has gone down.
Here's a breakdown though. I borrowed 8k at a rate of 19.9%. Extortionate I know. It's been exactly a year into it with repayments at 167 a month, for 4 more years.
I'm thinking to borrow the same amount from tesco at 4.3% to settle the loan. However I'm sure that I won't get that rate, maybe around 10-11%.
Jeebz92 said:
Thanks guys. Really helpful advice here.
I've actually paid a fair bit capital off as the balance has gone down.
Here's a breakdown though. I borrowed 8k at a rate of 19.9%. Extortionate I know. It's been exactly a year into it with repayments at 167 a month, for 4 more years.
I'm thinking to borrow the same amount from tesco at 4.3% to settle the loan. However I'm sure that I won't get that rate, maybe around 10-11%.
Try doing a 'soft' credit check first to see how your credit rating stands - it could give you an idea how close you can get to the headline rate. If it's higher now then there are some lenders advertising at 3.9%.I've actually paid a fair bit capital off as the balance has gone down.
Here's a breakdown though. I borrowed 8k at a rate of 19.9%. Extortionate I know. It's been exactly a year into it with repayments at 167 a month, for 4 more years.
I'm thinking to borrow the same amount from tesco at 4.3% to settle the loan. However I'm sure that I won't get that rate, maybe around 10-11%.
48 months @ £167 = £8016 total payable
£6500 from Tesco at 5.7% APR (what their calculator gave me) is £7071 total payable in 3 years. 10% APR is £7524 total.
There is a saving, but that's over a shorter time so it's not a straightforward comparison. Can you overpay the existing loan to reduce the capital, or amend it to shorter term? Basically, if you can afford and extra £30-£40 per month to put in the loan, do it.
My brother has been doing this for the past few years, he ended up with about £30k debt so took a loan to clear a big chunk of it albeit at a high interest rate. After paying off the remaining credit card debt he paid some over payments on the loan and when his credit rating was a lot better he took out another loan to pay off the high interest one, this one was with a lower interest rate thus saving a large amount of interest each month. He's now on a 3rd loan but has the balance down to a few grand and the interest is around 5% but he's able to pay an extra £300 per month off the balance without penalty
xRIEx said:
4 or 5 years ago I paid off a NatWest loan early, the settlement charge was 2 months (or possibly 56 days) interest; if the saving on the new loan rate (as mentioned above, you may not get the advertised rate, they just have to make sure at least 51% of applicants get the advertised rate) outweighs the settlement charge on the existing loan, go for it.
if the old loan has a clause about early repayment charges being linked to interest, you can pay off the vast majority of the loan and leave a tiny nominal amount outstanding for a month and then completely pay it off, that way the interest linked penalty will be pence.kentmotorcompany said:
You need to speak to your existing lender and request a settlement figure.
Being one year into your loan you will almost certainly paid mostly interest up until now. You will have paid almost none of the capital.
They arranged like this so if you pay it off early, they still earn nearly all the interest. Bankers eh!
This, i have just worked out!!Being one year into your loan you will almost certainly paid mostly interest up until now. You will have paid almost none of the capital.
They arranged like this so if you pay it off early, they still earn nearly all the interest. Bankers eh!
I have a loan with £4200 left on it, i am now in a position to pay off in full, asked for a settlement figure, am told £4100!!!!
Hardly worth paying off, may as well keep the cash in the bank, and continue paying!
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