APR and repayment of loan

Darryl93

Hi,

Im currently paying 10% APR on a loan and am looking to replay early using a new loan at a lower APR. I came across admiral who would offer 6.9% APR on a loan of £4000 which would be good however if I were to take out a loan of £7500 then the APR is only 3.2%. As far as im aware, its a fixed APR so it would change for the duration of the loan and its flexible in that you can choose to repay early without incurring a charge. My question would be, as I only need £4000 but want the lowest APR i can get, would it be possible to take out a loan of £7500 at 3.2% APR then subsequently repay £3500 soon after so that I only have £4000 to pay in monthly instalments but at a low APR?

Any advice welcomed. Thanks

marty2be2000

First thing is ignore the headline rate, they only need to offer that to a certain percentage of successful applicants. Consolidation loans (which you are in effect doing) never attract the headline rate, and could be higher than the rate you are currently paying.

DCFC79

Darryl93 wrote: »

Hi,

Im currently paying 10% APR on a loan and am looking to replay early using a new loan at a lower APR. I came across admiral who would offer 6.9% APR on a loan of £4000 which would be good however if I were to take out a loan of £7500 then the APR is only 3.2%. As far as im aware, its a fixed APR so it would change for the duration of the loan and its flexible in that you can choose to repay early without incurring a charge. My question would be, as I only need £4000 but want the lowest APR i can get, would it be possible to take out a loan of £7500 at 3.2% APR then subsequently repay £3500 soon after so that I only have £4000 to pay in monthly instalments but at a low APR?

Any advice welcomed. Thanks

Yes theres nothing wrong with the idea (as long as you do as you suggest) but be aware you might not get the headline rate, depends on various factors eg your credit history, current debts, salary.

[Deleted User]

Remember also that your monthly payments would remain at the same level (but finish earlier), so you need to know that you can afford the payments based on the higher amount.

piggeh

I was looking at the same thing. From what I can see, I can take a £7,500 loan at 3.4% (nationwide current customers) - I only want about £2.5k which is 13.9%

£2500 loan over 60 months is £56.99 a month, total payable is £3,419.40

£7,500 loan is £135.93 per month, total payable £8,155.80. Even paying the £5k off later (which would maybe be good for investment purposes if you can get a guaranteed income of over 3.4%?) it would be £3,155.80 in total which is better than the rate normally.

Paying it a month into the agreement and the interest is recalculated, by the time the loan is paid off in full (month 19) it would be about £150 of interest eg, about £2,650 for a £2,500 loan?

I guess considerations are:

- whether the headline rates apply (although nationwide say these rates apply to current customers in my case)
- The increased monthly payments you must meet
- What would be total interest if you just overpaid the smaller loan by £80 a month? I make it about £2800 which is maybe less worth the hassle.
- would they be less likely to lend to people in future that immediately pay back a chunk ie. is it seen as abusing the system?

If you took the smaller loan at higher interest, you'd pay a bit more, but you also have the flexibility of paying the minimum (£56.99 per month) if you are a bit short one month.