Early termination of finance

[Arese]

Hello

Theoretically in theory. Say I found a car that I really wanted, but I don't have the readies for just yet. It's at a dealer, and it looks like a good 'un so I don't want to miss it. The car is £8k, and I could probably muster up a £1k deposit, and finance the £7k.

But, I don't want the finance long-term and would probably be able to clear it in a couple of months. What do you think is the best way to do it? Is there likely to be a high repayment penalty if I want to pay it off early? Maybe a personal load would be better, as I don't think they have early repayment charges?

[Spiritual_Beggar]

Personal loan would be the best way if you intend to repay early, though there are a few finance co.s that may not give penalties for early repayment.

I'm pretty sure I can make payments in excess of my monthly charge without any penalties.

[Fats25]

If you truly believe you have the readies in two months...........

Either get a short term Overdraft, or put on a CC. I think my credit card gives me 60 days to pay off with no interest charged.

[markcjd]

Arese said:

Hello

Theoretically in theory. Say I found a car that I really wanted, but I don't have the readies for just yet. It's at a dealer, and it looks like a good 'un so I don't want to miss it. The car is £8k, and I could probably muster up a £1k deposit, and finance the £7k.

But, I don't want the finance long-term and would probably be able to clear it in a couple of months. What do you think is the best way to do it? Is there likely to be a high repayment penalty if I want to pay it off early? Maybe a personal load would be better, as I don't think they have early repayment charges?

Legitimate lenders will charge (generally) 1 months interest for early settlement. They will also rebate a proportionate amount of the interest as it is calculated on borrowing for the complete term. HP can be easily settled early but cannot (again generally) facilitate monthly overpayments.

Do not discount taking finance from a dealer as many HP lenders can provide a cheaper alternative to high street lending. Cars upto 4 years old can attract rates as low as 4.9% flat from major groups. Be wary of dealers offering HP but signing you up for a personal loan agreement, these generate much higher commissions but do not offer the protection available with HP.

[homerjay]

markcjd said:

Arese said:

Hello

Theoretically in theory. Say I found a car that I really wanted, but I don't have the readies for just yet. It's at a dealer, and it looks like a good 'un so I don't want to miss it. The car is £8k, and I could probably muster up a £1k deposit, and finance the £7k.

But, I don't want the finance long-term and would probably be able to clear it in a couple of months. What do you think is the best way to do it? Is there likely to be a high repayment penalty if I want to pay it off early? Maybe a personal load would be better, as I don't think they have early repayment charges?

Legitimate lenders will charge (generally) 1 months interest for early settlement. They will also rebate a proportionate amount of the interest as it is calculated on borrowing for the complete term. HP can be easily settled early but cannot (again generally) facilitate monthly overpayments.

Do not discount taking finance from a dealer as many HP lenders can provide a cheaper alternative to high street lending. Cars upto 4 years old can attract rates as [b]low as 4.9% flat[b] from major groups. Be wary of dealers offering HP but signing you up for a personal loan agreement, these generate much higher commissions but do not offer the protection available with HP.

thats about 10% apr.

typical loan rates are back under 8% (granted if you can get them)

[Arese]

Spiritual_Beggar said:

Personal loan would be the best way if you intend to repay early, though there are a few finance co.s that may not give penalties for early repayment.

I'm pretty sure I can make payments in excess of my monthly charge without any penalties.

Good point(s). I've only recently paid off a personal loan, so didn't really want to kick off another. Although I know they can pretty much be cleared and funds in your account in a matter of days. With your second point, if I took out finance and 'overpayed' months 1 and 2 so much that I cleared the loan, I imagine they'd see that as early repayment.

I suppose if I spoke to the dealer and agreed a price I could ask him to try and find me a finance product with no early repayment charge.

Fats25 said:

If you truly believe you have the readies in two months...........

Either get a short term Overdraft, or put on a CC. I think my credit card gives me 60 days to pay off with no interest charged.

I will definitely have the readies in the first week of December if not sooner, so a credit card is not a bad idea. I would have to make sure I timed it right or I'd end up with a st load of interest.

[Arese]

homerjay said:

markcjd said:

Arese said:

Hello

Theoretically in theory. Say I found a car that I really wanted, but I don't have the readies for just yet. It's at a dealer, and it looks like a good 'un so I don't want to miss it. The car is £8k, and I could probably muster up a £1k deposit, and finance the £7k.

But, I don't want the finance long-term and would probably be able to clear it in a couple of months. What do you think is the best way to do it? Is there likely to be a high repayment penalty if I want to pay it off early? Maybe a personal load would be better, as I don't think they have early repayment charges?

Legitimate lenders will charge (generally) 1 months interest for early settlement. They will also rebate a proportionate amount of the interest as it is calculated on borrowing for the complete term. HP can be easily settled early but cannot (again generally) facilitate monthly overpayments.

Do not discount taking finance from a dealer as many HP lenders can provide a cheaper alternative to high street lending. Cars upto 4 years old can attract rates as [b]low as 4.9% flat[b] from major groups. Be wary of dealers offering HP but signing you up for a personal loan agreement, these generate much higher commissions but do not offer the protection available with HP.

thats about 10% apr.

typical loan rates are back under 8% (granted if you can get them)

Thanks markcjd and homerjay.

I'm happy to speak to the dealer and see what they can do. The car is a 2006, so based on what you say then one month's interested shouldn't be too hard to swallow. I currently bank with A&L and they provided my last loan at their best rate, so I'm reasonably confident I could get an 8.9% from them.

[homerjay]

if its your bank anyway, youve deffo got more chance of getting the rate advertised.

[Mr Roper]

Put down a £1000 deposit and tell them you'll pick it up in two months.

[Arese]

Mr Roper said:

Put down a £1000 deposit and tell them you'll pick it up in two months.

[waterwonder]

Don't forget documentaion fees these can amount to £500 on hp or pcps and sometimes on personal loans. You won't get these back. Not always applicable but read the paperwork carefully. The dealer should know what these are off the top of their head.

[markcjd]

homerjay said:

typical loan rates are back under 8% (granted if you can get them)

Depending on balance and term it's 10-12%. Advertised rates and supplied rates are 2 very different things. In the vast (99%) majority of cases we supply the rate offered. The only exception to this is sub prime lending where higher charges are inevitable.

High street lenders need only offer their advertised rate to approximately 16% of applicants to justify the term "Typical APR"

[homerjay]

markcjd said:

homerjay said:

typical loan rates are back under 8% (granted if you can get them)

Depending on balance and term it's 10-12%. Advertised rates and supplied rates are 2 very different things. In the vast (99%) majority of cases we supply the rate offered. The only exception to this is sub prime lending where higher charges are inevitable.

High street lenders need only offer their advertised rate to approximately 16% of applicants to justify the term "Typical APR"

'typical' part aside , i know most people dont get anywhere near that.

so an advertised rate of say 8.9% (ie http://www.alliance-leicester.co.uk/loans/index.as... is not actually a loan at 8.9% APR?

[Arese]

waterwonder said:

Don't forget documentaion fees these can amount to £500 on hp or pcps and sometimes on personal loans. You won't get these back. Not always applicable but read the paperwork carefully. The dealer should know what these are off the top of their head.

Very good point. At this price point, an extra £500 is a lot.

[inman999]

Surely credit card is the way to go as long as you can get a limit high enough.

My rudimentary maths tells me 1 months interest would be roughly 100 quid so not the end of the world.

[Arese]

inman999 said:

Surely credit card is the way to go as long as you can get a limit high enough.

My rudimentary maths tells me 1 months interest would be roughly 100 quid so not the end of the world.

It's a good idea, and I have a card here with enough credit on it already.

[homerjay]

Arese said:

inman999 said:

Surely credit card is the way to go as long as you can get a limit high enough.

My rudimentary maths tells me 1 months interest would be roughly 100 quid so not the end of the world.

It's a good idea, and I have a card here with enough credit on it already.

the dealer may try and charge you the circa 2.5% merchant fee though, which is another £200 on £8k

[inman999]

homerjay said:

Arese said:

inman999 said:

Surely credit card is the way to go as long as you can get a limit high enough.

My rudimentary maths tells me 1 months interest would be roughly 100 quid so not the end of the world.

It's a good idea, and I have a card here with enough credit on it already.

the dealer may try and charge you the circa 2.5% merchant fee though, which is another £200 on £8k

Good point, I'd not thought of that. Could possibly be negotiated out as a deal clincher.

[Arese]

homerjay said:

Arese said:

inman999 said:

Surely credit card is the way to go as long as you can get a limit high enough.

My rudimentary maths tells me 1 months interest would be roughly 100 quid so not the end of the world.

It's a good idea, and I have a card here with enough credit on it already.

the dealer may try and charge you the circa 2.5% merchant fee though, which is another £200 on £8k

Gah. Give it to me in one hand...

Might be a moot point anyway. The car I had in mind turns out to be ex-Police, and has had £4k+ of work done in 4 years (33k miles), including a new gearbox!

[markcjd]

homerjay said:

'typical' part aside , i know most people dont get anywhere near that.

so an advertised rate of say 8.9% (ie http://www.alliance-leicester.co.uk/loans/index.as... is not actually a loan at 8.9% APR?

Alliance and Leicester said:

8.9% APR is our typical rate for loans £7,500 to £14,950 entered into through this source. We will review your past credit history and other personal details and the actual rate we offer may be higher depending on our assessment of your personal circumstances and financial behaviour.

We used to mystery shop loan companies to ensure we remained competitive. At the time advertised APR's were circa 6.9% and we were generally offered between 12% and 19.9%. Given that we used a squeaky clean credit profile to conduct the mystery shop the decision to increase rate was not based upon poor credit history. The payment difference at the extremes of this example is £54 per month on a 3 year £10k loan.

Edited by markcjd on Friday 22 October 15:12