Two loans over to a 0% Credit card?

Paully232000

CLAPTON wrote: »

no this is 100% incorrect


The issue is for any give loan amount (9835 in this case) and given period (4 years) and for any given total amount of interest collected (3,068) you can calculate the APR as round 15-16% or the flat rate as round 7.8%.


Obviously, corrupt lying car salesman like to use the lower figure (surprise surprise) than the figure that allows the customer to compare their rate with a normal bank loan. (which will always be quotes as an APR)


The sole and only purpose of the 'flat' rate is to trick the customer into thinking they are getting a cheap loan. Sadly they frequently succeed.

what is wrong with what i have said?

r6demon

OK, I have now been through this calmly with the individuals concerned. As you have pointed out, what I thought was APR was flat rate but I didn't get the wool pulled over my eyes as such.

It was a way of fixing a problem that we created by having a car we wanted to get rid of (trade in) but we owed more than the car was worth on the current agreement so we were £1800 the wrong way on the finance. To get around this, they pushed the rate up which gave said salesman a commission, this commission was then given back to us in additional discount off the new car. so although we are paying £1500 interest over what we thought we were we didn't have to pay upfront for the money we owed on the trade in.

Its called lumping and bumping or something and is now a banned practice anyway.

Its also worth noting that we also bought the car at around £2k less than book price plus the additional money that was paid off the old finance, so despite the seemingly high APR we saved money on the long run.

What I should have done is then switched to a low APR loan straight away?

r6demon

So, that brings me back to my original question.....

1) Is it worth paying off both loans with the new 6.8% APR loan

2) to avoid being charged the 58 days of interest on the last payment of each loan, can I pay off 90% in one payment leaving the last payment to be a small amount??

Any help appreciated, its been well worth it as my knowledge of basic finances has gone through the roof!! THNAK YOU!

Now to try and save some money!!

Quimoi

In general it's always better to move debts to lower interest rates. You have to bear in mind the length of the new loan though and the total interest you would be paying compared to how much the interest would be on your existing loans.

I'd suggest taking out the 6.8% loan over 24 months which gives a monthly repayment of about £373. If you just pay it back at that rate then it would cost you very slightly less in interest compared to your existing loans (£600 v. about £630).

As you are comfortable paying £600 per month though then make overpayments of £230 each month to the new loan which would reduce the term down to about 14 months and save about £285 in interest compared to your existing loans.

Important to check that overpayments are allowed and any fee for them.

For your second question you need to either check your loan agreement or speak to them and ask.