Borrowing more then i need to get longer term

markey164

I'm looking at taking out a Tesco loan, but for loans under £15k, the max term is 5 years, whereas if i borrow £15k, the max term is 10 years. The 5 year term would make my payments higher than i'm comfortable with.

Could i take out the bigger loan, then after a couple of months pay the difference back as an overpayment? I could then retain the longer term, and hence lower monthly payments, giving me more disposable income.

Is there anything wrong with doing this?

ch3101

markey164 wrote: »

Is there anything wrong with doing this?

Yes, much higher interest rate. You'll find that 15k over 5 years at headline rate is <17k total. £15001 over 10 years is £20875 total.

Your choice of course, just seems daft

redcard

Do Tesco accept overpayments?

jonesMUFCforever

markey164 wrote: »

I'm looking at taking out a Tesco loan, but for loans under £15k, the max term is 5 years, whereas if i borrow £15k, the max term is 10 years. The 5 year term would make my payments higher than i'm comfortable with.

Could i take out the bigger loan, then after a couple of months pay the difference back as an overpayment? I could then retain the longer term, and hence lower monthly payments, giving me more disposable income.

Is there anything wrong with doing this?

You ask is there anything wrong with this - yes there is - it will not work.
Under the CCA which you will sign, it states fixed repayments - the payments are fixed even if you overpay.
You will save because you will not pay the interest that would accrue on the overpayment over the term of the loan.

I would suggest you need to have a rethink - perhaps going over to the debt free wanabe board and use some of the tools on there to budget better.

CLAPTON

markey164 wrote: »

I'm looking at taking out a Tesco loan, but for loans under £15k, the max term is 5 years, whereas if i borrow £15k, the max term is 10 years. The 5 year term would make my payments higher than i'm comfortable with.

Could i take out the bigger loan, then after a couple of months pay the difference back as an overpayment? I could then retain the longer term, and hence lower monthly payments, giving me more disposable income.

Is there anything wrong with doing this?

yes it will work

you get the fixed lower monthly payments that you desire and you overpay so the period of the loan is reduced whilst benefiting from the lower APR.

whether it is sensible to take such a large loan is another matter

markey164

ch3101 wrote: »

Yes, much higher interest rate. You'll find that 15k over 5 years at headline rate is <17k total. £15001 over 10 years is £20875 total.

Your choice of course, just seems daft

a) I've checked, and the representative APR is the same
b) as mentioned above, the monthly payments over 5 years are higher than i'm comfortable with, how is that daft?

My plan was to get lower monthly payments up front, then make overpayments when convenient to reduce the overall term and the overall interest.

In answer to post #3, As i understand it, for any unsecured loan taken out after 1 February 2011, you are allowed to make overpayments, Tesco included:

faq.tescobank.com/help/loans/add_payments (i took off the http:// as i'm not allowed to post links)

CLAPTON

markey164 wrote: »

a) I've checked, and the representative APR is the same
b) as mentioned above, the monthly payments over 5 years are higher than i'm comfortable with, how is that daft?

My plan was to get lower monthly payments up front, then make overpayments when convenient to reduce the overall term and the overall interest.

In answer to post #3, As i understand it, for any unsecured loan taken out after 1 February 2011, you are allowed to make overpayments, Tesco included:

faq.tescobank.com/help/loans/add_payments (i took off the http:// as i'm not allowed to post links)

with respects to the other posters I think they have misunderstood what you intended.

markey164

jonesMUFCforever wrote: »

You ask is there anything wrong with this - yes there is - it will not work.
Under the CCA which you will sign, it states fixed repayments - the payments are fixed even if you overpay

According to Tesco's Loan FAQ's the above is not how their loan works. Their FAQ on overpayments says:


Can I make additional payments to my loan?

Answer:
Loan applications made on or after 11 June 2010

You can make an additional part payment to your account. There are two ways of doing this, just let us know which way you’d prefer before making a payment:

Your monthly payment can be reduced and the term of your loan will remain the same;
or
Your monthly payment remains the same and the term of your loan can be reduced.
Both options will give you an interest rebate, which means you will pay less interest overall on your loan.

markey164

CLAPTON wrote: »

with respects to the other posters I think they have misunderstood what you intended.

Sorry if i didn't explain it very well. I thought it was a good idea at first, to get around the 5 year limitation.

My plan is actually to pay it off in much less than 5 years, as i have things I can sell (so the overall interest etc becomes less relevant), but in the short term i wanted lower more comfortable payments, to give me a little breathing space.

The Tesco Loan looks really flexible in offering BOTH reduced monthly payments OR reduced loan term when making overpayments, which is great. Sainsbury's only offers the latter.

ch3101

You can't borrow 15k over a longer term than 5 years from Tesco unless the loan is for Home Improvements.

The APR 7500-15000 is 5.1% then 15001 - 25000 is 7.2%, so no idea why you think that is the same.

markey164

ch3101 wrote: »

You can't borrow 15k over a longer term than 5 years from Tesco unless the loan is for Home Improvements.

The APR 7500-15000 is 5.1% then 15001 - 25000 is 7.2%, so no idea why you think that is the same.

Of course i know 5.1% is not the same as 7.2%, it just wasn't as clear from your first post what you were saying, as in your 2nd post. The mistake I made was to put in 15000 instead of 15001 in the loan calculator which of course makes the big difference, and makes it not quite as attractive. Thanks for highlighting that.