Large loan for better rate + overpayments

sabrina_imogen

Just a quick question as I am pretty new to all of this!

I am thinking of taking out a personal loan to buy a nearly new car. Looking around the interest rates are better once you hit the £7500+ mark but I don't actually want to spend that much. Theoretically would it be possible for me to take a loan of £7500 and overpay back into it any that is left over after my purchase in order to secure the lower interest rate?

Thanks for your help

DCFC79

sabrina_imogen wrote: »

Just a quick question as I am pretty new to all of this!

I am thinking of taking out a personal loan to buy a nearly new car. Looking around the interest rates are better once you hit the £7500+ mark but I don't actually want to spend that much. Theoretically would it be possible for me to take a loan of £7500 and overpay back into it any that is left over after my purchase in order to secure the lower interest rate?

Thanks for your help

Yes you can do it like that but its all dependant on whether you can get a £7,5k loan based on your salary and other debts etc.

ManchegoMan

I know HSBC offer personal loans to their account holders and anything above 7500k is 5.9%apr representative. No overpayment charges so you could borrow 7.5k and pay back what you don't need early. repayments will remain the same per month until the loan has been repaid in full, but you will still pay all the interest calculated for the loan amount of 7.5k and term length regardless of how much you overpayed.

It may still be cheaper to take out a lower amount loan with higher apr%. I'm sure a loan calculator will allow you to work out and make comparisons. I'm not an expert on this - just posting my recent experiences as I was looking for a similar offering.

Tixy

repayments will remain the same per month until the loan has been repaid in full, but you will still pay all the interest calculated for the loan amount of 7.5k and term length regardless of how much you overpayed.

No personal loans work like that now. Interest is calculated based on the daily balance, and all personal loans now have to allow partial overpayments.

Some banks will insist on keeping the loan payment the same after a large overpayment, but then both the term and interest payable are reduced.

And some banks allow you to choose between reducing the montly payments or reducing the term.

gb12345

ManchegoMan wrote: »

but you will still pay all the interest calculated for the loan amount of 7.5k and term length regardless of how much you overpayed.

No you don't - the interest is calculated on the balance outstanding, so if you payback £3k of the loan immediately then the next month's interest will be calculated on a balance of £4.5k)

lottie3000

I took out a loan for the full value of the new car I wanted and then sold the original one privately and paid that off against the loan. The interest is re-calculated when the overpayment is made. Mine is a Haliax loan and they kept the monthly payment the same and shortened the term. Sainsbury's loans let you choose whether to change the term or the monthly repayment.

ManchegoMan

Sorry for the misinformation there. Thats good to know as I am thinking of a small loan myself.