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6.9% cap1 vs. fixed term loan for kitchen

I intend to redo my kitchen soon @ up to say £7500.
Should I:-

1/ Use money presently deposited @ 5% gross

2/ Use existing credit limit on Cap 1 @ 6.9%

3/ Apply for either mge increase or fixed term fixed rate unsecured loan

Any suggestions welcomed.

( A slight personal preference is to keep existing capital "for a rainy day" as long as cheap loans are available.)

Comments

  • Depends on what your priorities are.

    If it's to pay the lowest amount in total (interest included) then you should use your savings.

    Unless you can get a purchases card with APR less than your interest on your savings (after tax).
    The above facts belong to everybody; the opinions belong to me; the distinction is yours to draw...
  • Fatboy_NSS
    Fatboy_NSS Posts: 546 Forumite
    Assuming you're a taxpayer, 5% savings pay 4% after tax so this would be the cheapest option, and you'd still have the credit available on the Cap1 card should you need it in an emergency. Next best would probably be adding it on to the mortgage as this would will be less than 6.9%, though it would probably be added over the full term of the mortgage so you may pay more interest in the long term.
  • How about getting a Marks & Spencer &More card? They offer 0% for 9 months on both BT's and purchases.

    Purchase the kitchen with the card, then pay off £500 per month over 9 months. Then, either move the remaining £4000 on to another 0% card or apply for a loan at that stage.

    It will certainly save you a lot of dosh in interest charges.
    Mortgage Feb 2001 - £129,000
    Mortgage July 2007 - £0
    Original Mortgage Termination Date - Nov 2018
    Mortgage Interest saved - £63790.60
    ISA Profit since Jan 1st 2015 - 98.2% (updated 1 Dec 2020)
  • TonyB
    TonyB Posts: 172 Forumite
    MLS,CR & fatboy, Thanks, However :-
    MLS Kitchen £7500,
    How did you arrive @£500 pm?
    And after 9mths balance £4k? Is that because only 7 actual 500's made?

    I won't be paying for some time yet I think so do you think it poss to sbt or pay cap1 cheque to investment acc & bt to m&s in the meantime?

    Generally speaking as long as the interest differential between borrowing & investing is below say 3.5% I am happy to have this charge (as I can painfully remember the days of long ago with credit rates well into double figures!) and present retirement income will well cover commitment which could be paid back instantly if need be. I take the point about keeping cap1 bal available as it really is a bird in the hand with no charge or interest cheques.
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