Loans & My First Post

£Wise

Hi there,

Just about to clear my credit card debt of about 6.5K which is on a Capital One 14 month 0% balance transfer deal.

Well I'm actually not going to clear it yet as I'm storing the money in a ICICI bank 4.5% interest savings account as I have 12 months left of the 0% deal.

Right, anyway...Now I need about £7000 to buy a new motorcycle and all the associated bits with it.

I was going to take out a Northern Rock loan over 120 months as they have a low interest rate and no early redemption penalty.

I was going to go this way because I want to make the lowest monthly repayments and then pay off the outstanding balance when I either sell the bike or when I have the required amount in my savings account. I will still be saving a lot of money per month, but I'm unsure what I may need to use this for in the short term so I need that flexibility.

A friend of mine told me that when he took a loan out with his bank (Natwest I think), he paid it off early and then was stung for an amount of interest he would have had to pay if the loan ran its full term. So now he still owes money to the bank despite paying off the balance.

So, two questions...

Is this scenario where a bank charges the interest that you would have accrued on a loan if you pay it off early a common one and does it apply to Northern Rock?

Should I just put the 7K I need on the Capital One credit card, pay off the minimum monthly fee and then transfer the balance to another long term 0% card when the current card 0% deal runs out?

Sorry for the long post...Just need some advice.

Thanks.

rjm67

If you can definitely afford to go down the credit card 0% APR route then I'd do that. Even if you can't get another 0% one, and you have to get a loan then you've not lost much (assuming the rates down go up a lot).

With loans, it's my experience that if you settle early then you will pay a penalty of a month or two's worth of interest, but not the full amount that you would have paidhad you let the loan run it's course.

Hope that helps.

£Wise

Thanks for the reply...

So that interest to pay that you speak of is nothing to do with an early redemption penalty (which Northern Rock don't have)?