Comparing loans - or at least trying!

Mjkpio · 15 March 2017 at 12:48PM

Hi, Can someone who is cleverer than I please help me understand which of the following loans is potentially best?

I pay £399.45/month car finance @10.5%. The balloon payment is due in September so I am looking to pay this off now, save a bit on interest, but mainly aiming to reduce my monthly costs and own the car (which I'm not planning on changing any time soon).

Loan Option 1: Sainsburys - £8,000/36months
Advertised @ 2.9%APR... actual 7.3%
+ 2 month "holiday" (amounting to 2x£399.45 "saved" in first 2 months)
Interest: £1,006.48
Total: £9,006.48 over 38 months
Monthly £250.18

Loan Option 2: Halifax - £8,500/36months
Advertised @ 3.3%APR... actual 5.9%
Interest: £773.96
Total: £9,273.96 over 36 months
Monthly £257.61

Because of the 2month holiday vs the extra £500 and different %APR rates etc I'm not sure whether Sainsburys or Halifax is better?!

Thanks in advance.

bengalknights · 15 March 2017 at 1:18PM

My calculations show Halifax as the better deal if you did a like for like £8k

Money_Rollercoaster · 15 March 2017 at 1:34PM

Do you need really need that extra £500 from Halifax? It's costing you about £45 in interest over the term ...

The Halifax is definitely the better deal ...

You're paying it off quicker
You only pay 9.1% in total interest on the overall sum borrowed (Sainsbury is 12.6%)

You might consider going back to Sainsbury and asking them to beat the Halifax APR ...

http://blog.moneysavingexpert.com/2012/05/08/sainsburys-launches-mostly-meaningless-price-promise/

https://www.sainsburysbank.co.uk/borrowing/bor_borrowing_zone (expand the bit about price promise guarantee)

Mjkpio · 15 March 2017 at 2:11PM

Money_Rollercoaster wrote: »

Do you need really need that extra £500 from Halifax? It's costing you about £45 in interest over the term ...

The Halifax is definitely the better deal ...

You're paying it off quicker
You only pay 9.1% in total interest on the overall sum borrowed (Sainsbury is 12.6%)

You might consider going back to Sainsbury and asking them to beat the Halifax APR ...

http://blog.moneysavingexpert.com/2012/05/08/sainsburys-launches-mostly-meaningless-price-promise/

https://www.sainsburysbank.co.uk/borrowing/bor_borrowing_zone (expand the bit about price promise guarantee)

Thanks.
Well the amount I need to pay off is about £8477... that £477 I can take from savings or from the loan.

I think the idea of the 2 months "holiday" was quite attractive as I could build up £800 of saved car payments, which could be handy for savings/anything else... but in the long run I think I agree the Halifax would be a better deal.

Arleen · 15 March 2017 at 2:13PM

Wait, stop, hammer time.

How much savings do you have there? Is it above the 1k needed for emergencies? If so - why not use this instead of taking out a loan and paying interest on it?

Mjkpio · 15 March 2017 at 2:34PM

Arleen wrote: »

Wait, stop, hammer time.

How much savings do you have there? Is it above the 1k needed for emergencies? If so - why not use this instead of taking out a loan and paying interest on it?

Yes, but not nearly enough. Plus it's allocated for decorating (in progress) new flooring (in progress) and whatever's left is going in the wedding fund... everything seemed to happen all at once over the last few months! Trust me, the loan IS needed

Arleen · 15 March 2017 at 2:41PM

Mjkpio wrote: »

Yes, but not nearly enough. Plus it's allocated for decorating (in progress) new flooring (in progress) and whatever's left is going in the wedding fund... everything seemed to happen all at once over the last few months! Trust me, the loan IS needed

I'm even more curious now as of whether it is really needed. In the end this is your debt and your life, but as I see your signature I wonder why do you want to get into more debt when you are so close to being debt free? Cannot the wedding fund turn into a dinner for close friends and family at local restaurant, which will set you back about 50 quid per head?

Mjkpio · 15 March 2017 at 4:27PM

Arleen wrote: »

I'm even more curious now as of whether it is really needed. In the end this is your debt and your life, but as I see your signature I wonder why do you want to get into more debt when you are so close to being debt free? Cannot the wedding fund turn into a dinner for close friends and family at local restaurant, which will set you back about 50 quid per head?

PM'd

And trust me, that's not gonna fly with the other half!

Mjkpio · 16 March 2017 at 10:36AM

Actually, after a bit more manipulation and maths the Sainsbury's offer still works out better (by 0.5%!)

The 2 month holiday will save me £798.90, but the loan amount is short £477 of what I need.
So... 798.90-477=321.90
That remaining £321.90 can be marked against the loan interest... 1006.48-321.90=684.58
And to get the % of the loan that is interest... 684.58/8000*100=8.55%

To compare...
773.96/8500*100=9.11%

StopIt · 16 March 2017 at 12:56PM

I'm confused, how can the 2 month holiday save £400pm if the monthly payments are £250

Also, have you calculated that the interest may still be added onto the loan for the holiday despite you not paying for it at the time?

[Deleted User] · 16 March 2017 at 2:40PM

Mjkpio wrote: »

And trust me, that's not gonna fly with the other half!

Then I suggest you put off the wedding, until the debt has been cleared, and you have saved enough money, to pay for the wedding.

Comparing loans - or at least trying!

Comments

Categories

Get our FREE Weekly email full of deals & guides - and it’s spam-free