New loan dilemma?

Raffers

I have a car loan at the moment and the settlement figure is £5,153.07. I've 3 years left to pay and this is working out to be £156 p/m (5.6% APR).

According to the MSE loan tool, I have a 95% chance of being accepted for a better loan for the same amount and term but at 3.8%APR. This would reduce my monthly payments to £152, which is a small saving but worth it if I knew everything would be a-ok.

However, I read that not all applicants get the advertised APR for loans. So, my question is - if I apply for the new loan and somehow don't get the advertised APR, might I end up pretty much exactly where I am already and with a search record on my credit history? Seems a bit of a risk just for a £4 p/m saving.

[Deleted User]

Raffers wrote: »

So, my question is - if I apply for the new loan and somehow don't get the advertised APR, might I end up pretty much exactly where I am already and with a search record on my credit history?

Correct. Not much of a saving, but not much of a risk either.

Candyapple

An easier option might be to see if you are eligible for any of the money transfer cards (namely MBNA who like to give large limits) and even with an initial 2.99% fee for 36 months at 0% on £5,153 would be £154, your monthly payments for the next 3 years would be 1% of your balance (roughly £50 each month). Just make sure you clear the balance towards the end or just overpay each month as much as you can.

http://www.moneysavingexpert.com/loans/cut-loan-overdraft-costs

Shakin_Steve

Candyapple wrote: »

An easier option might be to see if you are eligible for any of the money transfer cards (namely MBNA who like to give large limits) and even with an initial 2.99% fee for 36 months at 0% on £5,153 would be £154, your monthly payments for the next 3 years would be 1% of your balance (roughly £50 each month). Just make sure you clear the balance towards the end or just overpay each month as much as you can.

http://www.moneysavingexpert.com/loans/cut-loan-overdraft-costs

This makes perfect sense, provided you can get a large credit limit to start with.

Raffers

Thanks both, however I'm probably missing the point here a little.

If I moved to the MBNA card (or equivalent) and add on the 2.99% fee, that gives £5,153 + £154 = £5,307.

How then does it follow that I need only pay back 1% of my balance each month for 36 months? That would only be £53 x 36 = £1,908 repaid. What about the other £3,399?

36 months paying back £5,307 = £147.42 per month.

DenisCooper

1% will be your minimum monthly repayment of your outstanding balance. It would obviously decrease monthly as your balance reduces.

you still have to pay the full amount back though, and you would want to do it before the end of the balance transfer, or transfer the remaining balance again.

foxy-stoat

Raffers wrote: »

This would reduce my monthly payments to £152, which is a small saving but worth it if I knew everything would be a-ok.

Even if you were guaranteed to get the lowest rate, this still wouldnt be worth doing, saving only £4 a month, unless I was planning on selling in the near future if the first loan is secured on the car.