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Borrow More, Pay Back Less
bigbloke45
Posts: 2,386
Forumite
in Loans
A friend of mine (it's not me!) wants to borrow about £3000 to buy a car. We've looked at interest rates for "smaller" loans and they look pretty horrible.
My idea is to borrow, say, £7,500 over 5 years (which seems to get you the lowest APR) but then put the excess of the loan into a cash ISA and draw down enough to pay the excess of the loan until both the loan and the ISA are extinguished.
The upshot being that he has got a lower interest rate on his loan to start with and the interest from the ISA "bit" that is in "escrow" both add up to a better deal all round.
I have stressed that this is all on the basis that he doesn't "dip" into the ISA part of the plan.
I'm more than happy to put some figures in via a spreadsheet . But, before this, does anyone think this idea is a "goer"?
My idea is to borrow, say, £7,500 over 5 years (which seems to get you the lowest APR) but then put the excess of the loan into a cash ISA and draw down enough to pay the excess of the loan until both the loan and the ISA are extinguished.
The upshot being that he has got a lower interest rate on his loan to start with and the interest from the ISA "bit" that is in "escrow" both add up to a better deal all round.
I have stressed that this is all on the basis that he doesn't "dip" into the ISA part of the plan.
I'm more than happy to put some figures in via a spreadsheet . But, before this, does anyone think this idea is a "goer"?
0
Comments
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Get a quote off of Zopa. They are experiencing a money flood at the moment and so rates have come right down. Flexible, too.
Disclaimer: Yes, I am a Zopa lender.Starting Debt: ~£20,000 01/01/2009. DFD: 20/11/2009 :j
Do something amazing. GIVE BLOOD.0 -
When you prorate the actual payments is there a huge difference?0
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