Making a loan 0% APR - how?

movilogo

From the MSE's cheapest loan article, I find that I can borrow £2500 from Zopa for 5.5% APR. However, Icesave is giving 5.95% APR [after tax I think it will come down to 5.5% or so].

I'm planning to buy a car for £2.5-£3k range. So, if I adopt this method, does it lead to basically 0% interest for borrowing effectively??

Or I'm missing something??

ThankYouAndEnjoy!

hello

if your are spending the money, then you will not be gaining any interest on the balance?? and will be paying interest on the loan

Am i right in that this is your sequence of events??

movilogo

Well, I placed the question in wrong way.
Here is a calculation I made on the first cell of Excel.

What I'm after is that, if the borrowing and investment rates are same, from what investment I can pay the entire monthly payment from the savings interest.

For example, my calculation for £2500 on 5.5% over 36 months shows I need to invest £16500 on same APR to enable my payment equal to interest paid.

Is this correct?

Borrowing Formula
Car Price 2,500
Downpayment -
Loan amount 2,500
APR % 5.5
Months 36
Monthly payment -£75.49 PMT(B5/1200,B6,B4)
Total repay £2,717.63
Investment
Amount 16500
APR% 5.5
Monthly interest 75.63 B10*B11/1200

obsessed_saver

Why don't you just pay cash and be done with it?

tom188

5.95% gross = 4.76% net basic rate, 3.57% net higher rate.

So no unless you are a non tax payer - and then its unlikely you would be eliglible for the loan rate.

it is also worth noting that it seems few people get the headline rate at zopa.

And as other posters have said it would not be a 0% loan anyway as you are effectively foregoing your savings interest.

movilogo

Thanks guys - understood the points!