big change in circumstance-can someone help me with the maths please?

asparagus1968

Hi, will try and keep this simple! Something I'm not great at...
From August I will increase to full time hours, approx £25,000 gross, from Part time .
I currently have a car loan, £5000, taken out 06/08/2014, over 4 years at 5.4% (totalling £5556.48)


Just wondering if come September I could get a no fee, 0% credit card with a limit that would cover the rest of the loan?


But how much would I owe by then?


I've read the loan agreement, doesn't deem to be any penalty fee for paying it off early, just says give notice and pay what is owed.


Thinking I may be able to save a bit of interest and pay it off quicker?


Is that enough information?


Thanks in advance!


ps. I have no other debt except my mortgage.

January2015

asparagus1968 wrote: »

Hi, will try and keep this simple! Something I'm not great at...
From August I will increase to full time hours, approx £25,000 gross, from Part time .
I currently have a car loan, £5000, taken out 06/08/2014, over 4 years at 5.4% (totalling £5556.48)


Just wondering if come September I could get a no fee, 0% credit card with a limit that would cover the rest of the loan?


But how much would I owe by then?


I've read the loan agreement, doesn't deem to be any penalty fee for paying it off early, just says give notice and pay what is owed.


Thinking I may be able to save a bit of interest and pay it off quicker?


Is that enough information?


Thanks in advance!


ps. I have no other debt except my mortgage.

I calculate £5k at 5.4% over 4 years would total £5,570 (monthly repayments of £116.05)

If this is correct then by end August 2016 you will owe £2,634.68

If the loan was 5.27% I get to the exact figure you have £5,556.48 (monthly repayments of £115.76)

Based on the 5.27% calculation and by end of August 2016 you will owe £2,631.34 (only a few quid between the two APR rates)

That is the amount you owe at the August 16 date and does not account for any early settlement charges there may be.

These are just my quick calculations and you would need to check with the bank.

asparagus1968

oh thank you so much.
yes, I pay £115.76 a month, but it deffo says 5.4% on the paperwork-strange, anyhow, not much in it.


So,if I got a fee free 0% balance Tf credit card over say24 months, would that save any money rather than just carry on the loan as is? I cannot get my head around figures!!

January2015

you need to know if the lender will give a reduction for early repayment. The figures I gave you only show the amount that will be owed end August 2016 based on the assumption the loan runs the full term.

If you let the loan run the full term you will pay a further £2,778.23 - so even if you get no discount for early settement you would transfer £2,631.34 to a 0% card and just pay that (provided you paid it off within the 0% offer timescale) rather than the remaining £2,778.23 if you let the loan run its course. Therefore you would be saving £146.89.

This is a very simplistic look at the figures. In reality your settlement figure for the loan is likely to be less than £2,631.34. You also need to make sure you can get a credit card offer that allows super balance transfers, i.e. transfers cash into your account rather than just transfers balances between credit cards.

asparagus1968

thanks January. will look into this more come august, definitely an option, though I admit I'd not thought about the super balance transfer aspect of it.
cheers.

redux

If you want to look at the numbers at any time, find an online loan calculator. I suggest the Guardian one, no political affiliation implied, it just produces nice columns of results.

At the time you are suggesting there would be £146.88 of further interest if the loan ran its full course. Bear in mind that some 0% interest deals have a flat fee at the start, reducing any saving you could make.

It might also be worth exploring just speeding up the repayments of the existing loan. To do that just put the 2631.34 and 5.27 in the calculator and try different numbers of months. Or any other starting figure earlier or later.

Sanctioned_Parts_List

5.4% APR is equivalent to 5.27% non-compounded annual interest - see http://stoozing.com/calculator/apr-rate-converter.php - it's a common trap when working out loan repayments.

Settlement values for early repayment vary by lender but are typically between 1 and 6 months interest, which by then will be about £11.55 per month. Also the balance transfer fee for the CC will be about 3%. So in the worst case you'll be transferring £2631.34 + £69.34 settlement fee + £81.02 balance transfer fee = £2781.70

(It's a very rare lender that offers a discount for early settlement. They normally charge a little for loss of interest.)

In this example, the fees and charges for switching to a 0% deal exceed the interest you'd pay on your existing loan.

It's all contingent upon how your existing lender calculates settlement balances - it's worth phoning them to ask what your present settlement figure would be and how it's calculated - they have to give you this information.

January2015

Sanctioned_Parts_List wrote: »

5.4% APR is equivalent to 5.27% non-compounded annual interest - see http://stoozing.com/calculator/apr-rate-converter.php - it's a common trap when working out loan repayments.

Useful link - thank you :beer: