Loan for Car

Zazzle88

Hi,

I am looking for some advice about getting a loan for a car. It would be my first car and I am looking to get something decent and reliable (around the £3k mark). I am over 25 and have a good, steady office job. I would need to get finance on a car but would not want to go through the dealership.

Cheapest interest on a £3,000 loan would be from sainburys at 12.4% APR. If I increased this to £5,000 interest goes down to 5.75%
Would it be wise to get the loan for £5,000 and put the extra £2,000 into a savings account and use this towards the loan repayments.
I have worked this out as follows.

Loan Amount - £5,000
Term - 36 months
Monthly Payment - £151.11
Total repayment - £5,439.96

£2000 / 36 = £55.56
£151.11 - £55.56 = £95.55

Total I need to find each month (on top of the money already in savings) = £95.55

Would this be a sensible solution?

Alternatively (with the higher interest rate of 12.4%)

Loan amount - £3000
Term - 36 months
Monthly payment - £99.28
Total repayment - £3,574

I consider myself very money savvy so would not spend the extra £2,000. What do people think?
Any help people?

CLAPTON

Zazzle88 wrote: »

Hi,

I am looking for some advice about getting a loan for a car. It would be my first car and I am looking to get something decent and reliable (around the £3k mark). I am over 25 and have a good, steady office job. I would need to get finance on a car but would not want to go through the dealership.

Cheapest interest on a £3,000 loan would be from sainburys at 12.4% APR. If I increased this to £5,000 interest goes down to 5.75%
Would it be wise to get the loan for £5,000 and put the extra £2,000 into a savings account and use this towards the loan repayments.
I have worked this out as follows.

Loan Amount - £5,000
Term - 36 months
Monthly Payment - £151.11
Total repayment - £5,439.96

£2000 / 36 = £55.56
£151.11 - £55.56 = £95.55

Total I need to find each month (on top of the money already in savings) = £95.55

Would this be a sensible solution?

Alternatively (with the higher interest rate of 12.4%)

Loan amount - £3000
Term - 36 months
Monthly payment - £99.28
Total repayment - £3,574

I consider myself very money savvy so would not spend the extra £2,000. What do people think?
Any help people?

even better is to get the 5k loan and then use the spare 2k to make an over payment to the loan which reduces the interest payable.

imoneyop

The sensible thing to do, if you get the £5000 loan is to immediately repay the extra £2000. You will be charge a small fee for doing this (usually 2 months interest), but the saving will still be far greater than you would earn by having the £2000 sitting in a savings account.

That of course assumes that you are able to get a £5000 loan and you also need to be aware that you may well not be offered the headline 5.75% rate - only 51% of successful aplicants get it.

Zazzle88

Thanks for this.
I have a very good credit score so would like to think I have a high chance of getting the loan but thanks for raising this. Would you go for the £5,000 option then over the £3,000 one?

imoneyop

First off, forget your credit score, it is an irrelevant number that the CRAs sell to people to make them feel all warm and fuzzy - lenders do not get to see it and have their own internal scoring system

It really depends on your salary and how much other available credit you have as to whether you would get the £5,000.