Loan vs savings-help needed.

gord115

I am thinking of taking £11000 out of my savings for a purchase.
It is in a Santander 123 account paying 1.5% interest.

The alternative is a Santander loan for £11k over 3 years,£322.72 a month, total amount payable £11617.92 (3.6%apr 1.87% flat rate)

According to my calculations, £11k if left in my savings it would be worth £11502.46 after 3 years.

Does this mean it is only costing me an extra £115.46?

Or would It cost me an extra £366.69 (£617.92 interest on my loan minus half of interest on my savings,assuming I put the £322.72 back in my bank every month)

Any help appreciated.

enthusiasticsaver

Have you actually been offered that rate for a loan?

There are better places for savings than Santander 123 on £11k now the rate has dropped. If you stick that £11k in Tesco current accounts or Bank of Scotland you would get 3% which is much better then it may be worth taking the loan out if you get that rate. Otherwise I would take the view that even if it is only £115 it is still more expensive to borrow.

PeacefulWaters

Wouldn't you be able to add £322 a month to your savings if you didn't have a loan?

Factor in the interest you could earn on that.

gord115

enthusiasticsaver wrote: »

Have you actually been offered that rate for a loan?

There are better places for savings than Santander 123 on £11k now the rate has dropped. If you stick that £11k in Tesco current accounts or Bank of Scotland you would get 3% which is much better then it may be worth taking the loan out if you get that rate. Otherwise I would take the view that even if it is only £115 it is still more expensive to borrow.

I don't want to change my current account though.

tidds

enthusiasticsaver wrote: »

Have you actually been offered that rate for a loan?

There are better places for savings than Santander 123 on £11k now the rate has dropped. If you stick that £11k in Tesco current accounts or Bank of Scotland you would get 3% which is much better then it may be worth taking the loan out if you get that rate. Otherwise I would take the view that even if it is only £115 it is still more expensive to borrow.

Tesco Bank only give you the 3% (which by the way is a fantastic rate at the minute) for up to £3,000. So not hugely useful in this scenario.

However, I have just applied for a Tesco Current Account purely to store 3k at this rate - so thank you. Helped me out :T

takman

tidds wrote: »

Tesco Bank only give you the 3% (which by the way is a fantastic rate at the minute) for up to £3,000. So not hugely useful in this scenario.

However, I have just applied for a Tesco Current Account purely to store 3k at this rate - so thank you. Helped me out :T

Don't forget you can open up two of them to get 3% on £6000!.

takman

gord115 wrote: »

I don't want to change my current account though.

You don't need to change your current account just open up additional accounts: 2 tesco current accounts 3% interest on £6k, Nationwide 5% interest on £2.5k and Lloyd's 4% on £5k.

PeacefulWaters

takman wrote: »

You don't need to change your current account just open up additional accounts: 2 tesco current accounts 3% interest on £6k, Nationwide 5% interest on £2.5k and Lloyd's 4% on £5k.

Lloyds dropping to 2%.

gord115

Thanks for all the advice but I still want to know how much more expensive it is to use the loan rather than my saving,can anyone help?

gord115

B.U.M.P. anyone?