Offsetting small loan against savings to get cheap rate.

willbiker

Hi all.

Here is my situation. I am 23, graduated a year and a half ago and am saving for a mortgage. I want to buy a new car but refuse to dip into my savings to buy one. So I am looking to take a loan out of around 3 -4k and want to get the cheapest rate possible. I wouldnt have a problem borrowing as I have a good credit rating and have a ok salary. I have been told that there are loan facilities available that allow you to offset your loan against your savings in order to get a very low rate or even zero apr.

Have any of you taken out a loan facility like this? I heard that virgin offered a one account which was similar however I am not sure if virgin still offer this facility.

What are my options?

Many thanks in advance.

Nice_Weather_For_Ducks

Whether you take a loan or use your savings is virtually the same thing. So assuming you are not using savings that are for emergencies, I would go for whatever is the cheaper option.

So unless you can find a loan at a lower rate that you are earning on your savings, I would be using the savings.

Maybe a credit card with a 0% deal on purchases would be suitable?

JuicyJesus

No mainstream bank offers this product. Offsetting is currently only available on mortgages.

You are, as Nice Weather For Ducks says, better off using the savings.

[Deleted User]

as the cost of a loan will be greater than any interest avaliable on your savings you will be better off using your savings then replacing them at the same rate you would repay a loan

Wilkins

Assuming that your savings are >£4k and that the interest rate you are getting is around current market rates, then do not get a loan. You would be throwing money away.

Utseya123

Since taking a loan does not make sense and you do not want to dip into your savings, why don't you consider leasing as an option?

mhmmhm

Set up a 'loan' to yourself: pay for the car out of savings and then repay yourself each month by standing order into your savings account. You can even charge yourself 'interest'.

I have this arrangement set up for a large loan that my husband and I owe: it suits me very nicely, I get 'interest' at a higher rate than savings account would give me but the loan rate is very reasonable :-) (and it means my OH still contributes rather than just going 'oh, it's been paid off out of savings'

27col

mhmmhm wrote: »

Set up a 'loan' to yourself: pay for the car out of savings and then repay yourself each month by standing order into your savings account. You can even charge yourself 'interest'.

I have this arrangement set up for a large loan that my husband and I owe: it suits me very nicely, I get 'interest' at a higher rate than savings account would give me but the loan rate is very reasonable :-) (and it means my OH still contributes rather than just going 'oh, it's been paid off out of savings'

I have done this several times in the distant past. It works well if you are strong minded about repaying the money to your account.