Re-Financing Existing Loan

exponential

Hi guys.

I just wanted the opinion of you guys on here as you seem to be the most knowledgeable people around when it comes to this sort of thing.

I have an existing Halifax loan which I took out only 3 months ago for £25000 at a rate of 16.9% (ouch) for 6 years at £538 a month. I used the money to clear all my credit card debts plus two loans that my wife had.
This has been a godsend as it has free'd up a huge amount of money per month for us plus has also relieved the burden of paying so many separate debts each month.

Great right....Well, I joined the credit club on here and, out of curiosity, did a loan search for 24k as that is the amount outstanding. It turns out I can now get the above funds for 10.9% which would reduce my payments by a further £75 a month.

My question is, should I take this loan offer (have been given a personalised quote off TSB) at this rate which will enable me/us to save even more money OR wait a while longer (say, 6 months or so) and try again in the hope of getting an even better rate further down the line.

I am in continued employment and earn more than enough to pay it back even if my wife comes out of work too....FYI.

Thanks in advance......:)

[Deleted User]

If you can get it, then I would take it.

But there's a reasonable 'if' around it. If declined, leave it a few months.

If you get it, don't use it to 'save money'. Use it to pay down quicker.

exponential

Deleted_User wrote: »

If you can get it, then I would take it.

But there's a reasonable 'if' around it. If declined, leave it a few months.

If you get it, don't use it to 'save money'. Use it to pay down quicker.

Thanks for the reply ZX81. It crossed my mind that I could overpay the loan to decrease it further. In your opinion, would waiting for a better rate be a waste of time?
I see all these advertised 3.3% loan rates and wonder....Who actually gets these rates?
My credit "score" through MSE club (experian) is 974. I know this is a meaningless number but if you take it at face value, surely I should get the best rates?
Is it the existing 25k loan that is keeping my offered rate high?

[Deleted User]

That's why your score is meaningless. You're highly unlikely to get the best rates with that sort of debt. You're in a high risk category.

abby1234519

exponential wrote: »

Thanks for the reply ZX81. It crossed my mind that I could overpay the loan to decrease it further. In your opinion, would waiting for a better rate be a waste of time?
I see all these advertised 3.3% loan rates and wonder....Who actually gets these rates?
My credit "score" through MSE club (experian) is 974. I know this is a meaningless number but if you take it at face value, surely I should get the best rates?
Is it the existing 25k loan that is keeping my offered rate high?

how much will it cost you to wait for a better rate? In those 6 months you wait you'll be paying higher interest.

The grass isn't always greener, I'd take the £75 saving and use that to pay off your loan quicker

exponential

Deleted_User wrote: »

That's why your score is meaningless. You're highly unlikely to get the best rates with that sort of debt. You're in a high risk category.

Very true pal...Thankyou. I appreciate your input...:D

exponential

abby1234519 wrote: »

how much will it cost you to wait for a better rate? In those 6 months you wait you'll be paying higher interest.

The grass isn't always greener, I'd take the £75 saving and use that to pay off your loan quicker

You literally just typed what I have just thought...Thankyou also for your thoughts. I'll go hit that "apply" button.....Fingers crossed....:)

T9090H

How did you get on exponential? Just a quick question make sure you put the new loan for 5 years instead of 6.

exponential

T9090H wrote: »

How did you get on exponential? Just a quick question make sure you put the new loan for 5 years instead of 6.

Hi. I've just been on the phone for nearly an hour whilst various anti-fraud checks etc etc were carried out an the loan was approved at the rate they quoted me.
I took the new loan out over a longer period because it reduces my monthly payments which allows me to overpay a lot more than I would be able to otherwise.
That's my logic anyway...LOL.

I'm saving over £100 a month now....I plan to have it paid off in under 3 years....👍.

T9090H

Excellent, if your committed to the overpayments then the balance will reduce much quicker ����

Money_Rollercoaster

You don't mention what the settlement figure was for the existing loan. Brace yourself for a bit of a hit as even though you would have made payments of about £1600 (3 months at £538), you'll have incurred interest for 3 months and they'll likely add a further 58 days interest as part of the settlement figure. Your settlement figure is likely to be pretty close to your original £25,000 figure and might even be a smidge higher.


Also, you've paid for 3 months already. So, ideally you should be looking to reduce the term for the new loan, which would help save further interest. You should be able to refinance over 60 months instead of 72 months and pay the same amount monthly (+/-) as your existing loan. Keeping to 72 months instead of 60 months will cost you about £1,600 in interest ... so not small change at all.


I wouldn't advocate leaving yourself in danger of not being able to pay your loan payments, but I would suggest that if you can afford more than £538 a month you should put aside anything you can spare. You can always contact the loan provider to make an overpayment if you have a pot of savings you've accumulated, or (as I've done), settle the loan early when your savings pot / settlement figure cancel themselves out.

EDIT - oops, took so long to type this, you've applied anyway! Don't forget to make sure the lender knows you're making overpayments to save interest and not advance payments. Some lenders require you to advise them of the amounts you'll be paying in advance (if it's by standing order, for example)