Loan enquiry

kurupt39

I know this may seem like a silly question but i want some advice before i take out a loan.

I am looking into taking a 2500 pound loan from zopa.com.

the monthly repayments as an average over there credit scoring is £55's roughly.

I work in a job where i get varying amounts of commission and know that some months instead of paying £55 I could possibly pay an extra tenner to a few hundred pounds on top each month.

Obviously I know that the interest is roughly 700 pound plus. But I want to know what kind of impact paying varying amounts on the loan will be.

CLAPTON

not a lot of info here


but if the apr of the loan is say Y% APR then paying an extra 10 in a month will reduce the interest paid by

£ 10 x Y% /12 for each suceeding month remaining on the loan.

jamesd

kurupt39, if you make an overpayment that will eliminate interest on the amount you overpay by for the remainder of the term, almost like a higher than minimum credit card payment. After an extra payment Zopa reduces the later monthly repayment amounts to keep the loan term the same.

If you're looking to borrow £2500 and make lots of overpayments Zopa probably isn't the best choice because the up-front Zopa fee that's added to the loan is quite a significant part of the cost. Have you considered applying for say a Virgin credit card and doing a balance transfer from the card to your current account? That has a 4% fee and then 0% for 16 months, well below the rate you'd get at Zopa. If you still have any balance left at the end of that time you can apply for a different card and use a balance transfer deal or just go onto the normal card rate until it's cleared.

Have a look at the Cheap Credit Card Loans article for more options.

Declaration of interest: I both have loans via Zopa and lend via Zopa. The amount of money available at Zopa makes it unlikely that I'll participate in any lending at present.

kurupt39

Ive looked in to more info on the debt.

The loan is for £2500 and the apr is 10.8%. You basically have to repay around £3208.41. You have to pay around £55 pounds a month for 60 months (5 years)

The payments i am talking about are ranging from 55 pounds (standard) paying payments from 500 at first for the first few months, to 400 for the next, to around 150 a month. making sure am always paying around double to ten times the amount that the repayments are set at.

There are some months when i could quite possibly pay 800 pounds a month. So would a loan be worth it or would a credit card pay ment be better and pay that way instead.

I kind of like the fact that if i take a loan out the minimum is always less that one hundred pounds.

whats best?

jamesd

With that level of payments there's no chance at all that a loan would be cheaper than the credit card, even less so at Zopa or any other lender that has a fixed fee. Given the payments you're planning an arranged overdraft would also be likely to beat many loans, particularly those with a fixed fee.

Have a look at the Super Balance Transfer Cards list at stoozing.com. SBT cards are those that allow you to do a transfer direct to your current account, just like a loan. The Virgin Money card has a minimum payment of 1% of the balance so at your initial £2500 balance that would be just £25 a month minimum. You'd pay £100 in the first month to pay the 4% balance transfer fee. I've a balance transfer from them myself and they are easy enough to deal with and easy to make overpayments on whenver you like.

If you do go for a card deal, there's no need to actually pay off more than the minimum because that doesn't save you any interest if it's a 0% for 16 months deal. Best is to put the money into a savings account and get paid interest on it. Then use the savings to pay off the balance just before the 0% time ends. Unless you just don't like having the borrowing lying around, of course.

Declaration of interest: I both have loans via Zopa and lend via Zopa. The amount of money available at Zopa makes it unlikely that I'll participate in any lending at present.

kurupt39

Thank you jamesd, for your advice.

Ive decided to go down to my bank today and see what they have to say about things. Am not looking to take the loan out till next year, or at getting the car till next year. Waiting for the commission to rise. I'm also thinking of giving the car seller 500-750 at first so that the amount paid of on my card or overdraft is as small as possible. This should stop me paying interest on that 500 to 750 pounds.

I have two credit cards and would be willing to talk with the bank about extending the credit limit or something.

I just want the fastest most easiest way of getting the car with out a sting at the end of the road.

(If i cant get it i'll sell my current car)

jamesd

If you don't need it for a while another option is to get a 0% for purchases credit card. Put all of your normal spending on the card and put the money into a savings account. Then try a balance transfer once the deal ends. With terms up to 12 months available and the amount you're after and considering paying that might be long enough. If not you can go the balance transfer route. This is cheaper than a balance transfer because there's no initial balance transfer charge.

kurupt39

Been to my bank and I have 3000 worth of credit on a card i hardly use. My other card is set at 300 pounds and i use that to pay bills and rainy days. Its always about 500 pounds in credit as well.

The advisor said the best way would be to pay the balance on my credit card as it has 9 months left of the interest free period.

The only problem is turns out the car seller only takes cheques or cards. However I think I'll bit the bullet and just take the money of the card and pay it off. In cash and cheque form.

jamesd

Sounds sensible to me. In the time until you buy you can do your normal spending with the card and put the money you spend into a savings account. That way you'll save teh cash advance charge on that much of the money.

kurupt39

I'm thinking that will be anything from ten to twenty percent on that kind of money. So what I am going to do is like you said save around 300 to 500 pounds so that as soon as I take the money out i can make a payment back the following day. That way instead of having 2000 plus that charge to pay, I'll cover that and a bit off the card.

Commission forcast next year in my job is said to be around 250 or more if this is the case I could potentialy pay approximately 300 to 500 pounds a month for the first few months, whilst the card is still on its interest free period to get the balance back down to around 800 quid which i will then pay off in 100 pound installments.

Thank You all for your help and information. Once I get the car i'll post a photo up of it for people to see.

k39

kurupt39

Oh i forgot i might be able to do a balance transfer into his account however will i need a furthur 250-500 quid to cover this.