Loan accepted but u would like less

Aimsleey

I've applied for and been accepted for (subject to signing and returning paperwork) an RBS loan to buy a new (to us... but used) car. The monthly payment is more than we expected (which is silly because we could easily have divided the loan amount by 48 to get an idea of preinterest payments) anyway, we have since reassessed and can probably borrow less, haggle & make do. Am I best to wait until the bank reopens and have them alter the loan terms, or apply again online for the lower amount?

Thanks!

Aimsleey

Sorry.... tried to edit typo in title and accidentally posted twice!

Nebulous2

What amount is the loan? There are key thresholds where loans become cheaper. If you are over £7500 it should be cheaper - interest rate, not overall payment obviously - Bringing it under one of those points might not be sensible. If you don't need all the money you can make an additional payment towards the loan very quickly, with a choice of reducing the monthly payment or reducing the term.

Are you likely to keep the car for four years? I don't like the idea of taking loans for longer than the period of time I expect something to last me. I've never gone over three years with a car.

rtho782

You may find the best way (because the interest jumps up as the loan amount reduces) is to take the full loan, then use a chunk of the money to make a large overpayment on day 2.

E.g. Rather than reducing your £7,500 loan to a £3,000 loan and paying a much higher APR, get the £7,500 loan, and immediately repay £4,500 leaving you a £3,000 loan at a lower APR.

Check the terms to make sure there are no penalties first.

JJG

rtho782 wrote: »

You may find the best way (because the interest jumps up as the loan amount reduces) is to take the full loan, then use a chunk of the money to make a large overpayment on day 2.

E.g. Rather than reducing your £7,500 loan to a £3,000 loan and paying a much higher APR, get the £7,500 loan, and immediately repay £4,500 leaving you a £3,000 loan at a lower APR.

Check the terms to make sure there are no penalties first.

Although this won't help them if the problem is the monthly repayments. As these will stay the same no matter what the overpayment is.

bazzyb

JJG wrote: »

Although this won't help them if the problem is the monthly repayments. As these will stay the same no matter what the overpayment is.

Not necessarily. Many lenders will allow you to reduce the repayment rather than the term when making an overpayment.

Nebulous2

JJG wrote: »

Although this won't help them if the problem is the monthly repayments. As these will stay the same no matter what the overpayment is.

Most lenders give you a choice of reducing the term or reducing the monthly payments. From Santander. http://www.santander.co.uk/uk/loans/loans-faqs

"Upon making a partial repayment you can choose whether to either reduce the term of your loan or your monthly repayment amount."

Aimsleey

It's a £25000 loan over 4 years, which we would like to lower to £20000. The monthly difference will be about £150 which is why we want to change it. We will keep the car 4 years, as that is what we have always done in the past. We have just finished paying off our previous 4 year loan and will trade that car in (I foolishly hadnt taken this into account when deciding how much to borrow. Looking at similar cars on Autotrader they are selling for about £6000 so my husband says we can realistically expect the dealership to offer around £4k/4.5 as a part exchange)

backinbusiness

25K for a car. Sheeeesh!