Taking a long term loan but pay off early

kingronnie

Hi, I'm a n00bie here, so be gentle! I've done some searching and I can't find an answer.

I'm considering taking out a loan of around £10k for a car. I can afford £400 per month repayments. I've looked at Zopa who will lend it at the same interest rate over 3 to 5 years (£300 per month for 3 years, £190 per month over 5 years). There's no early repayment fee.

My question is this:

If I go for the longer option it gives me a safety net should I loose my job, so,considering I'll be paying off the debt early (all being well), is there any advantage in going for the shorter term option?

Thanks in advance.

andyfromotley

doesnt look like it. My only observation would be that people who take things over a longer term intending to pay it off sooner seem to rarely do so. Having the shorter term imposes a discipline to repaying.

How secure is your job? Would you be any more able to repay the £190 than the £300 if you lost it?

kingronnie

Thanks for your reply

My job is pretty secure, but I'm a belt and braces kind of person and I like to take as little risk with money as is practical.

If I were to loose my job then £190 would be almost as difficult to find as £300, I take your point, but hopefully I'd have built up a decent amount of overpayments by then. at £400 pcm.

With regards to discipline, I'm 15 years in to a 25 year, £100,000 mortgage which I'm paying off on my own and I've got £7,000 to go. I'm pretty proud of that :T

Thing is, that's been 15 years of hard saving and mostly driving an old banger. I do 20,000 miles a year and I am finally going to get a reasonably new car to ferry myself around in! I just don't want to risk my financial stability any more than I have to in order to do so.

Mazzlaa

Hi kingronnie
How did you get on with this?
I am paying of a loan in € at home, but was thinking of getting a Zopa loan to take advantage of the sterling strength and get some extra to buy a car.

I could absolutely afford the 2 year repayments but the rate is the same for 3 years and this would give me more flexibility if I wanted to go on an adventure.

It seems too good to be true that I could overpay the 2 year repayments some months and use the 3 year repayment other months?

Also, I've done a soft search with Zopa and they have agreed with the interest rates and such but did yours change upon making a formal application? I've only been in the UK 3 years so trying to build some good credit (in fairness its already quite good).

kingronnie

Hi Mazzlaa,
I'm actually going to go another route. I've been reading Martin's credit card tips and I think it's going to be cheaper for me to get a long term 0% interest credit card. I'm sure I can pay it off within the time-scale required (normally 24 - 27 months), so it'll be a 'free' loan (apart from charges).
This may be worth considering for yourself.