Loan interest

mottyt

Hi,


If you needed 5k and the rate was e.g 5%, yet the rate for 15k was 3.5%, could you borrow 15k, put 10k in a savings account (such as Santander 123) at 3% interest and then you're only paying 3.5% on the 5k and 0.5% on the 10k.


Would that work?

[Deleted User]

Remember you'll pay tax on the interest you earn. Which would make it cheaper to get the 5k loan.

TrickyDicky101

You would have to pay tax on the interest you earn on the current account. Also, the loan rate would likely be fixed whereas the current account rate could change - so you risk ending up with a bigger loan and paying more in interest without much in return for your deposit.

Other than that it *could* work. It's called 'arbitrage'.

Cycrow

A cheaper way, assuming the loan lets you (which most should)
is to borrow the 15k, then pay back the 10k straight away, so you end up with 5k left on the loan, but at a lower rate.

althou usually the best rates for loans are 7.5K-15K so you may only need to borrow 7.5k instead

Xbigman

If you can afford the repayments on a 15k loan then your best bet would be to take 5k but over a third of the timespan. The apr might be higher but the total charge for credit should be lower because you are payiing off more of the loan capital each payment.



Darren

bris

Where is this wonder loan at 3.5%?

mottyt

Was just an example but first direct are doing 3.6% anyway

Hailey21

Yes, i think it will work.
Try it.
It is cheaper way to borrow loan.