Alliance & Leicester "Further Borrowing

ashington10

hi

Was looking at the most cost effective means of borrowing some money to buy a new car.

The best personal loans rates appear to be around 7.5% APR. I looked at further secured borrowing with my current mortgage provided - Alliance & Leicester. They have a rate at 4.99% APR (4.49 plus bank of England base rate). This looks attractive but of course it will rise when interest rate go up over the coming years. The chap at the call centre mentioned that I could change this (once the money loan amount has gone into my account) to another in affect mortgage product. I asked what these rates might be but was told they they cannot say until you formally apply (rates changing daily type argument). I was wondering whether anyone has recently done what I'm thinking about doing i.e. borrowing money at the 4.99% rate then fixing at a mortgage product rate. Importantly what are their current rates as rates for existing borrowing are never displayed upon their website. Only other thing was the fact it initial application fees, the 4.99% rate has a £199 fee. I was wondering what the existing mortgage "fees" were as it would be stupid to have paid £199 to only then have to pay a further fee (maybe £500) say.

[Deleted User]

i`m afraid if they cant tell you its unlikely we can. 4.49%+b of e looks good for a loan tbh,and no one seriuosly expects IR to rise much if at all this year.

CHR15

I'm not familiar with the option they are promoting but to secure a car against your Home is like juggling with knives.

leelondon_2

CHR15 wrote: »

I'm not familiar with the option they are promoting but to secure a car against your Home is like juggling with knives.

How is it like juggling with knives? When you receive your offer it will explain what will happen to your repayments for each 1% increase in the bank of england rate, make sure you are happy with that.

Also you can phone up A&L now and ask them "lets pretend I have taken the further loan out right now, can you put me through to the department that deals with the swapping the mortgage to a better rate so i can see what the current options are" they will put you through and the ppl there can explain what the options are, obviously this will be in theory only and the time when you actually take the loan things may be better or worse or the same..

I did this a few months ago and you can switch to fixed, tracker type mortgages etc and these will beat the standard offer.

I have the offer accepted, we are considering a loft conversion, so not the same as yourself, but we still got 6 months till the offer runs out. But again I dont see how this is juggling with knives, loans against property are far cheaper than the personal loans so its a good option so long as you are happy you can afford it and you have a plan for when the stuff hits the fan..

CHR15

Let me put it another way:

Q. You buy a car on secured finance (HP) - What happens if you lose your job and cannot meet the repayments on your car?
A. You lose your car

Q. You buy a car secured against your House - What happens if you lose your job and cannot meet the repayments on your car?
A. You lose you Home.

Securing accessories like cars against the very home you live in is quite frankly madness.


I'll quote you a paragraph from Martins comments on Secured Loans:

Contrary to glossy TV ads secured loans aren't an easy option for those with heavy debts. A home isn't something to gamble with. These are purely loans of last resort. The only good reason for using them is to cut existing debt costs. Those considering secured loans for new borrowing or purchases should simply not do it.

geoffky

Then they cry that the loan was mis-sold and they did not realise they would lose the house...i await...

leelondon_2

Sorry that doesnt make complete sense. This is a further loan not a new mortgage, so in this scenario there is an existing mortgage repayment regardless of if you have financed a car with a further loan or not!.

Therefore if you lose your job then you could potentially lose your home. My point is whether you have financed a car with a further loan or not you still have a mortgage to pay! If someone thinks this may happen then there is income protection insurance, mortgage payment protection insurance, savings, also as the car is owned it can be sold, etc etc, but my main point stands this is not a silly way finance, its not juggling with knives (which is clearly a silly way to juggle).

CLAPTON

seems a bit confusing

you seem to be asking two separate questions

-is it best to borrow for a car on your mortgage ?
-is it best to change your mortgage to a fixed rate?

is that right?

Apples2

There are more variables to consider.

Lets suppose you crash your car which leaves you unable to work and thus, lose your job. For whatever reason the car insurance doesn't pay out.
You end up trying to fund your newly increased mortgage from a much reduced income.

The lower your secured mortgage is, the more likely you will be in a position to weather the storm until you are back on your feet.
Start piling up car loans on your mortgage, it will be more difficult to maintain those payments.

Just one example, maybe your car gets towed off to the crusher for no tax, who knows?

Of course Insurances are available but it doesn't take long reading this Forum or indeed many newspapers to see how risky PPI can be to claim on.

Eating into equity is another thing to consider, put a car on your mortgage could affect your chances of moving later on (little/negative equity).

Keep depreciating assets like cars as unsecured and you can always walk away from it without risking your home.