First time personal loan question...

jason589 · 28 July 2012 at 11:46PM

Hi, I am contemplating taking out a personal loan to fund purchasing a used car for me to get to work.

I have found many competitive deals, but I would just like some help in calculating the interest I would pay.

As an example, if I took out a £7500 loan for 3 years, I would expect to pay 6% APR representative interest. This would work out at around £450.00

Does this mean, that in addition to re-paying the £7500, I would also pay £450.00 per year in interest? Or would I just pay £450.00 for the entire length of the loan?

Any help would be really good

BugsyBrowne · 29 July 2012 at 9:23AM

I take it you've got an excellent credit history with no late/missed payments and a long history of managing credit lines.

The total charge of the loan would be around £700.

Mulder00 · 29 July 2012 at 9:31AM

It's 6% per year on the outstanding balance. The best would be to use a loan calculator to help you work it out, because it's 6% on the balance which is paid off as time goes on, so the interest will reduce as you pay it off.

Total interest payable on your example would be £695, so you'll end up paying back £8195.

andymc29 · 30 July 2012 at 10:09AM

If you're going into debt for a car, then you need the cheapest car you can get. The car will go down in value far quicker than you will pay off the loan.

I bought a £3000 Ford focus five years ago and it's still going strong.
Keep the price low, you can get perfectly good cars for under £3000.

tell_it_how_it_is · 30 July 2012 at 10:20AM

Also remember OP, assuming you haven't yet applied, you are not necessarily going to receive an interest rate of 6% - you may see any firm offers being double or even treble that figure.

And of course factor in the cost of insurance, tax, fuel, MOT, repairs etc. etc. - it sadly all adds up!

AlexLeigh · 31 July 2012 at 1:52PM

Try the loan calculator on moneymadeclear.org.uk

Put in the amount to borrow, the term and your APR and you'll get the figures you need

Bianchi · 4 August 2012 at 5:09PM

I thought I would piggy back this thread to save another as I'm looking to take out my first loan and just wondered if I would have any issues or be subjected to a higher rate than advertised (5.9-6.2%)

The two-year PCP contract on my car expires in a couple of months and I plan to hand it back and buy its replacement using a loan. I'm looking to borrow £9k over 4 years to buy a new car.

My personal circumstances:
Home owner (worth circa £160k, £82k remains of my mortgage).
Earn £28k per annum
No missed mortgage, PCP, credit card or miscellaneous payments.
£400 on my credit card (that should be paid off before loan applied for).

I'm assuming it's good practice to have the PCP contract closed before applying for the loan.

Any potential issues?

Thanks MSEs

paddyrg · 4 August 2012 at 5:38PM

Bianchi wrote: »

I thought I would piggy back this thread to save another as I'm looking to take out my first loan and just wondered if I would have any issues or be subjected to a higher rate than advertised (5.9-6.2%)

The two-year PCP contract on my car expires in a couple of months and I plan to hand it back and buy its replacement using a loan. I'm looking to borrow £9k over 4 years to buy a new car.

My personal circumstances:
Home owner (worth circa £160k, £82k remains of my mortgage).
Earn £28k per annum
No missed mortgage, PCP, credit card or miscellaneous payments.
£400 on my credit card (that should be paid off before loan applied for).

I'm assuming it's good practice to have the PCP contract closed before applying for the loan.

Any potential issues?

Thanks MSEs

Frankly that sounds not too bad - you've got a history of managing credit well, have some equity to borrow against, and I assume enough spare cash to make the payments. Just the kind of borrower lenders tend to like.

Of course the only way to know for sure is to find a lender, but it looks pretty decent overall.

Bianchi · 4 August 2012 at 5:59PM

Thanks Paddy. I was hoping to have few problems with the loan amount. I just need to find a lender with an acceptable APR. I really don't want to be paying more than 6-something percent.

I bank with and have my mortgage with HSBC so I would assume my chances of being approved for their 6.2% rate would be better than applying with another lender?