Help needed - looking to take out a loan but pay off early

robocop1

[FONT=&quot]looking to take out a loan to buy a car - after looking around the best deal/rate seems to be Sainsbury's.

I am looking to borrow 15,000 but will be looking to pay off in 1 year/12 payments.

Thee figures i have been quoted are:

15,000 loan - 7.8%APR
monthly payments of £233
total payment after 7 years 19,572
Early settlement fee 56 days interest.

As mentioned already, i will be paying this off in 1 year so would like to know what the settlement figure will be. I've chosen 7 years as it makes the monthly payment more comfortable in the meantime.

After talking to Sainsbury's it seems noone will/can tell me what the figure will be but they have confirmed they use the Actuarial theory?

Can someone confirm what settlement fee would be in 12 months and actual provide the calculaion logic so i can play around with differnet loan amounts and get the answers?!

Thanks,

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CLAPTON

in simple terms
daily interest on 15,000 at 7.8% is
15000 x 7.8%/365 = 3.205
so 56 days interest is 3.205 x 56 = £179

now in practice after one year you would have paid off some capital so you would owe a bit less than 15,000 but it gives you an idea of the cost.

robocop1

Great, thanks.

So if the early settlement penalty is £179, what would the actual settlement be? I make it nearly £13,500 on the nose?

LeeSouthEast

If you need a flexible loan, get a quote off of Zopa. There are no early repayment fees so despite a marginally higher APR, may work out cheaper for you if you don't intend to keep it for the entire loan period?

robocop1

Brill - wil give them a look though to be honest the early settlement fee isn't the problem, its the amount of interest i would need to pay Sainsburys or similair if i settle after only 1 year.

Would Zopa or anyone else offer a better way (to me!) of applying interest or do all companies front load it on a loan?

LeeSouthEast

Most of it is front-loaded these days I believe (although as always I am open to being corrected lol).

robocop1

Bummer eh!

So can anyone tell me what my actual settlement figure will be or point me in the direction of a trustworthy calculator?

Cheers

robocop1

Can anyone help as i need to move pretty quick!

by using the following calculator i make the settlement at 22 months including 56 day interest penalty £11,984 +£179. Sainsbury say it would be £12,400?

financecalcs.co.uk/smartcalcs/Settlement.php

22 months 1/4 of the term is the only amount they will quote me, while i will pay off at 12 months i need to know what the figure will be - I'm concerned that the calulator in the link may be wrong and dont want to get caught out5\ - can anyone help???

vaporate

Why get a loan to buy a car for 15k? money bin.

3.5k car is enough to get you A to B. That's all it is.

CLAPTON

the calculator is broadly accurate

the numbers never seem to tie up exactly as it depends upon things like
.. the gap between agreeing the loan and the date of the first payment
.. the amount of notice between request for settlement figure and the assumed payment date
.. whether that gap includes a payment or not.

just to add... the calculator includes the early settlement fee so there is no need to add 179 on
in any event it wouldn't be 179 as your capital outstanding would have dropped to about 13,400 after 12 months and the interest would be based on the capital remaining.


however, I can't explain why the bank makes the settlement figure of 12,400 after 21 payments as I make it about 12,144.. its just possible I suppose that their figure is for settlement BY the 21 month (i.e. you have actually only paid 19 or 20 payments ) and not settlement AFTER the 21 payment as I have assumed... so for 19 payments then the settlement would work out over 12,400


as long as you are consistent in making comparisons then I wouldn't have thought it makes a lot of difference.

jamesd

It's a legal requirement for them to disclose the early settlement charge at 1/4, 1/2 and 3/4 of the way through the loan. 21 months is 1/4 of the way through it. That presumably means 20 payments and settlement on the date of the 21st.