Loan verses Credit cards

rj_uk

I have applied for and been approved for but not yet accepted an unsecured personal loan, details as follow;

Term; 36 months
Amount; £7,500
Charge for credit; £1550.76
Total amount payable; £9050.76
APR:13.4%
Monthly repayments of £251.41

The loan was for:
New car; £5000
Consolidate credit cards; £2100
lower the APR: £400

I no longer need the money for the car! :-)

The question is should I still take out the loan, repay the cards and immediately give the £5400 back to the bank as an early repayment?

If my calculations are correct I will then have 10 monthly installments of £251.Is this even allowed to repay a loan with a part of the loan (why not just borrow as much as possible to lower the APR and then payback what you dont need?)

Alternatively I pay the cards back £251 a month. The cards are approx as follows;

Vanquis; £150 (35%APR)
Aqua; £500 (35%APR)
Barclaycard: £1000 (25%APR)
CapitalOne; £450 (22%APR)

I usually try and pay as much of the Vanquis and Aqua card off each month(its rarely any more than £300 but this month has been expensive and will be £650) and a little of the barclaycard (eg £50) but only ever minimum payment on the CapitalOne.

After all expenses I have a budget of roughly £300pcm towards repayments.

I suppose my questions are;

a) Can you replay a part of a loan with the loan iteslf or will the banks frown to this?
b) Or what is the better potion; Higher APR but more flexibility by paying off credit cards each month... or.... Lower APR Loan and a commitment with fixed repayments but having borrowed £7500?

Im trying to calculate the exact cost of loan and it says daily interest of 0.0035%. So am I correct to think if I pay the £5k back immediately the total repayable would be nearer £8,000? About £500 interest which would be the same as the credit cards I think/

redpete

rj_uk wrote: »

a) Can you replay a part of a loan with the loan iteslf or will the banks frown to this?

Depends, best to ask the bank whether they accept early repayments on that type of loan. (They won't know that the money you give them is the same money they loaned to you - in fact as it will all be electronic transfers it's a philosophical debate as to what it means for such money to be "the same.)

b) Or what is the better potion; Higher APR but more flexibility by paying off credit cards each month... or.... Lower APR Loan and a commitment with fixed repayments but having borrowed £7500?

Entirely dependant on your personal circumstances, self-discipline and attitude to money. I'd maybe go with ta third option, take £7500 loan, immediately repay what you don't need, keep to the loan repayments and pay in extra as you are able.