Very short term loan ....

RacingSnail

Afternoon all,

I am expecting a lump sum of inheritance in the very near future, however unfortunately the probate process took much longer than expected and I now find myself in the embarrassing position of having committed to a £20K outlay which will need paying around 3 weeks before the inheritance is paid out. Foolish, I know. But this is the position I find myself in as the chap I'm buying from has changed his mind about how long he was willing to hold the item now he's got my deposit.

I've looked into Sainsbury's loans and for £20K over 60 months I would be looking at approx £375 per month at 4.8% APR. (This is a headline marketing quote so I would expect this to go up a little). The total repayable would be £22,500, so £2,500 in interest. (Numbers have been rounded for easy maths).
It looks as though you can take a 2 month payment holiday at the start of the loan too.

It looks as though Sainsburys have an early settlement policy of two months interest so I've been trying to calculate roughly how much interest I would have to pay to effectively borrow the £20K for a month, but I've got myself confused with front-loaded interest etc.

I know this is a little unorthodox, but roughly how much should I expect to pay as an early settlement fee after a month?

Many thanks for any advice!

Best regards

RacingSnail

brendon

the chap I'm buying from has changed his mind about how long he was willing to hold the item now he's got my deposit.

Do you have the terms in writing?

RacingSnail

I do, and I'm covered.

He's offered me the deposit back, but I still want the item. That's not really the issue.

I just want to make sure I'm not going to be charged £700 by Sainsburys if I take their loan and almost immediately pay it back.

redpete

It's really not difficult.

You are hoping to borrow £20k for 1 month then pay it all back with 2-month additional interest payable - so you will be paying 3 months' interest in total.

3 months interest on £20k at APR of 4.8% is approx 4.8% x £20k x 3 / 12 or £240.

But of course you don't know that you will be able to borrow £20000 or that if you can it will be as cheap as 4.8%.

RacingSnail

Thanks for pointing me in the right direction redpete. I know there's no guarantee, but my credit is in good shape.

So using your maths, if the rate was 6% for example, then I'd be looking at £300 for 3 months interest?

Thanks mate!

RS

bearcat16

RacingSnail wrote: »

It looks as though Sainsburys have an early settlement policy of two months interest so...

It's not just Sainsburys that do this, its standard for personal loans etc as it's required by the consumer credit act after finance companies used to take the mick with huge early settlement fees. Now they cannot charge more than 2 months interest for settling early. So shop around for the best deal, don't just use sainsburys for this reason.

You could avoid early settlement fees altogether by making an overpayment. The CCA allows you to make overpayments of any amount at any time, so you could simply make an overpayment of the outstanding balance less £50 or so, then later request a settlement figure for the remaining £50.

https://uk.finance.yahoo.com/news/overpay-loan-without-penalty-120133911.html

Also, regarding Sainsburys amazing headline rate - there are numerous threads about how nobody, even with excellent credit history, seems to be able to get the rate advertised, and instead get offered a rate nowhere near as good. The problem is, to find out what rate you'll get they will do a credit search.

Personally I have found sainsburys to be pretty rubbish. I had superb credit history, homeowner, never missed payments, never late with payments, had approx 3 finance accounts that were settled early etc, and still didn't get a decent rate.

Tesco, in my opinion, are far better.

RacingSnail

That's great thanks - didn't know an overpayment could work in my favour like that.

Will have a look into Tesco too - Time to get a clubcard as it looks like around 1% APR difference if you have one.

somethingcorporate

Do you bank with nationwide?

They offer to beat any loan quote by 0.5%.

Every little helps...

andyfromotley

20k is a huge personal loan and may be very tricky to obtain depending upon your earnings and credit history and the like.