Top up loan?

Nige64 · 17 October 2016 at 5:31PM

Hi folks, I just can't get my head round this, I'm useless at this sort of thing...
About a year ago we borrowed £6000 against our house with the Nationwide, the repayment was £8000 over 60 months at approximately £133.50 per month. We did this to buy a half decent car as ours was on it's last legs. So far we have made via diect debit, 10 months payments.
Now.
The bank has been on to us to top the loan up to £10k with a total repayment of £10,800, which means the interest will be £800 instead of the £2000 interest we're paying on our original loan. They have said we need to repay £5231 out of the new loan leaving us with £4769 cash in hand.......but of course, we'll be starting the new loan from day one and will be paying about £180 per month for 60 months....=£10,800.
Our heads are going round trying to work out if we'd be better off taking the top up or leaving things as they are? The extra cash would be great as it can go towards an extension, but are we paying more interest? Which way do we go?
Any help much appreciated
Nige

DCFC79 · 17 October 2016 at 5:49PM

I know it might not be a response you were looking for but are you aware of the implications of borrowing against your home.

Nige64 · 17 October 2016 at 5:57PM

Yes thanks, we knew about that and have a steady income which pays off the debt, I'm retired so the income (I hope) is guaranteed

[Deleted User] · 17 October 2016 at 5:58PM

What are the interest rates on the old and new loans?

Nige64 · 17 October 2016 at 6:08PM

Well the old one is a repayment of £8000, borrowing £6000, £2000 interest over 5 years,
The new loan is repayment of £10,800 borrowing £10,000, interest of £800 over a new 5 years. To hand I don't have the exact percentage, but I'll go and find it out.

Edit. We're paying 12.7% at the moment, if we top the loan up it'll drop to 3.4%

Nige64 · 18 October 2016 at 9:37AM

Although I go brain dead when it comes to working things out, I think I've found the answer. At the moment we're paying £2k interest on this £6 loan. If we go for the new loan, we'll be paying £800 interest on a £10k loan, so if you add together the £800 + the money we've already repaid, £1330 that totals £2130 interest on a £10k loan, so it's only going to cost £130 more for the extra £4k.............

I think.

ReadingTim · 18 October 2016 at 10:49AM

Whilst you might "need" a new(er) car, you probably don't "need" and extension. If you want a new extension, then save up and pay for it from savings - the bank are trying to sell you something with this top up loan suggestion, so it's going to benefit them, and in my opinion, something that is beneficial for a bank isn't usually beneficial for the customer.

enthusiasticsaver · 18 October 2016 at 8:05PM

Are you sure you borrowed against your house for the car or was it unsecured? 12.7% does not sound like a secured loan rate and many banks have minimum loan amounts for secured £10k usually and yes 3.4% sounds like a secured loan rate.

Personally I would not put any loan for a car on a secured basis. Have you started the extension and how much is it going to cost? If you are in a position to pay £180 per month I would overpay the unsecured loan to get that paid off asap and then consider the extension. Paying £2k interest on a £6k loan is extortionate.

Dobbibill · 18 October 2016 at 9:11PM

Nige64 wrote: »

Although I go brain dead when it comes to working things out, I think I've found the answer. At the moment we're paying £2k interest on this £6 loan. If we go for the new loan, we'll be paying £800 interest on a £10k loan, so if you add together the £800 + the money we've already repaid, £1330 that totals £2130 interest on a £10k loan, so it's only going to cost £130 more for the extra £4k.............

I think.

Just to play devil's advocate and give you another thought.

You won't have £10k........you'll have £4769 and a car that's a year older

You will then be resetting the clock to now to begin 5 yrs of payments.

redux · 18 October 2016 at 9:40PM

How about taking the new loan to replace the old, then paying about half of it back almost immediately?

Or just ask for a pro rata smaller one in the first place.

Carrben01 · 19 October 2016 at 5:07PM

I have a loan with Nationwide and get a lot of emails about top ups, looking at the email it doesn’t state I am guaranteed to get the advertised rate, see below quote from the email:

"Mr ****, as you already have a loan with Nationwide we may be able to lend you £10,000.00 at 4.6% APR [FONT=&quot]if you apply before 20 October 2016[/FONT].

This example is tailored to you personally but if you want to borrow more or less, or your circumstances change the rate may be different."

Top up loan?

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