Take out a loan or use my own money?

Not_tight_just_careful

V.Lucky wrote: »

One thing you haven't taken into account with your calculations is you won't actually lose £1140 in interest, as if you make monthly payments back to yourself you will accrue more interest over the 5 year period.

Lost me on that one sorry?

AndyT678

What you are effectively doing is borrowing money to put it in your bank account.

If you have calculated that you come out ahead by borrowing money at 3.7% to leave it on deposit getting 3% interest (pre tax) then you have done your sums wrong.

Not_tight_just_careful

AndyT678 wrote: »

What you are effectively doing is borrowing money to put it in your bank account.

If you have calculated that you come out ahead by borrowing money at 3.7% to leave it on deposit getting 3% interest (pre tax) then you have done your sums wrong.

The money would be to pay for the car not to put into the bank.
I'm happy to admit that I could have sums wrong but (Ones I quoted are correct)
and not taken all things into consideration but would like to here where I have done them wrongly. At the end of the day this is why I put the post up :-)

Pixie5740

If the OP receives 3% gross then as a basic rate tax payer the interest rate would be 2.4%. At the end of 5 years, £10k earning 2.4% net will earn the OP £1,259 in interest.

Remember that the principal in the savings account remains £10k over the course of the 5 years whereas the outstanding amount of the loan principal decreases over the 5 years until it reaches zero.

[Deleted User]

Not_tight_just_careful wrote: »

The money would be to pay for the car not to put into the bank.
I'm happy to admit that I could have sums wrong but (Ones I quoted are correct)
and not taken all things into consideration but would like to here where I have done them wrongly. At the end of the day this is why I put the post up :-)

Andy's correct. If you use your own savings, then your are not making the loan payments (let's say £200 per month).

So that £200 per month goes back into your savings, meaning your savings go from £0 in month 1 to £1000 at the end of year 5. So you would effectively have an average balance of £5000 for the five years - meaning you would only lose £570 in interest (based on your original figures).

So it's cheaper to use your own money.

MEM62

Not_tight_just_careful wrote: »

That is currently my train of thought also.
I have the money in the bank should anything happen job-wise.
So wheres the risk?

The risk is that you take the loan and at some point in the near future use all or part of the 10K you have in the bank for something else. Thus leaving yourself exposed should you lose your job.

Not_tight_just_careful

Deleted_User wrote: »

Andy's correct. If you use your own savings, then your are not making the loan payments (let's say £200 per month).

So that £200 per month goes back into your savings, meaning your savings go from £0 in month 1 to £1000 at the end of year 5. So you would effectively have an average balance of £5000 for the five years - meaning you would only lose £570 in interest (based on your original figures).

So it's cheaper to use your own money.

OK, it took me a couple of reads to get the point there:p but now see what you mean:T
The results are slightly tainted though by the fact the Santander rates are:-
<£1999 =1% interest
<£2999 =2% interest
So not all savings at 3% until you reach over £3,000 which you were not to know.