Replace old loan with new?

ockhamsrazor

Hi everyone... time I joined and asked this, rather than googling and getting nowhere...

I have a 4 years left on a 5 year loan at 3.6% of about £16k with Zopa - no early repayments. Monthly repayment of £364.

I think I will have some income next summer that will pay off this loan (or almost pay it off) (not guaranteed - might not be as much as that and so I might be able to pay off partially).

I am thinking I could (1) carry on as I am or (2) take out a loan from Sainsbury's at 3.1% for the amount over 5 years. Repayment would be about £300 a month and, although there are 58 days interest applied for early settlement, this would perhaps allow me to pay off either next year or the year after (any lump sum I get next year would go into savings, at pitiful return...).

Does anyone have any advice? Is the 0.5% lower rate enough to make this call?

Thanks in advance!

:-)

Gaz83

If you already have a £16k loan, then Sainsbury's are pretty unlikely to give you a new one at 3.1%. They don't have any guarantees you'll use the new one to pay the old one, and will assess you on potentially having £32k of debt. Depending on your income and circumstances you might not even get approved for the new loan at all.

Alexd52

Also, is the Sainsbury's loan at 3.1% representative, if so, you have to consider that you may well not get this rate, even if you get the loan.

ockhamsrazor

That's a fair point, but in that case would be worth trying. I suppose I'm trying to get my head around whether I'm missing something or whether there is a potential saving. I get too confused with different loan terminologies (however many helpful glossaries I look at!).

JJG

Why not take the Sainsbury's loan out over 4 years as that's all that's left of you Zopa loan. The difference over four years is only about £170. And a difference of only £4 a month on repayments. It's up to you whether that is worth it.

DCFC79

No harm in applying for the loan from Sainsbury's but be warned you might not be offered the 3.1% rate, it will depend on many factors but wont be your credit score as only you can see it. Just dont feel aggrieved if you don't get the 3.1% rate

foxy-stoat

Not sure what you are hoping to gain by trying to extend your current loan by another year - you are more than likely wont be offered the lowest headline rate so you will not save anything.