Loan or use savings

DrEskimo

looknohands wrote: »

The loan document says you may have to pay interest of 58 days if you pay it early but you can pay earlier definitely. And I understand what you're saying, makes perfect sense, but seems strange that would be such an simple loop hole to getting lower interest though.

Yea I suspected as much...does that refer to repaying the entire loan in full early though? What about just lump sum repayments to pay down the amount?

looknohands

It's an early repayment settlement, you are allowed to make overpayments, the exact wording says it will 'reduce the interest and may reduce the payment period'. And it can then cost up to 58 days of interest 2 months sounded like a small amount over 30 months or would it be a considerable chunk?

DrEskimo

looknohands wrote: »

It's an early repayment settlement, you are allowed to make overpayments, the exact wording says it will 'reduce the interest and may reduce the payment period'. And it can then cost up to 58 days of interest 2 months sounded like a small amount over 30 months or would it be a considerable chunk?

Yea, so if you make a overpayment of £7k, not a early settlement of the entire £9k, you should incur no fees?

I'm pretty sure I've read advice on here about how people should not settle the entire loan when they are looking at settlement, but leave a nominal amount outstanding for a final month payment so that they do not incur the early settlement fees.

I could be wrong, and would welcome more knowledgeable members to clarify, because as you say, it does seem like an obvious loophole to get lower APR on lower amounts....! But then again, the amount looking for small loans who are offered low rates on higher amounts, that also have the cash to make large overpayments, are probably in the minority and not a major concern to the lending companies....bit like those that take cars on finance to benefit from the finance contributions and perks, that then settle the finance in full straight after.

looknohands

enthusiasticsaver wrote: »

Of course in 3 years time you will also have the residual value of the car you are buying now. You could also maybe use regular savers to overpay the loan. Presumably this is being bought as a personal vehicle not a company one as you own your own companies? Do you get any tax breaks for purchasing it as a company vehicle?

I think the rules are quite tight on claiming the VAT, has to be new / zero personal use. So this wouldn't work, we don't want a brand new car and we will be using it 90% for personal use.

Also I'm never keen on claiming cap allowances that are a bit borderline. I know it's possible to do it (my brother in-law does) but I feel it could one day end up working against you, for example if we were to speak to investors / partners etc in the future a cap claim like that or a stupidly high dividend might raise some eyebrows!

Penelopa.Pitstop

You can take higher amount loan and repay part of it. Settlement fees kick in when you pay off loan in full early, not part of the loan. It seems like a loophole, but people who need small loans may not be able to take bigger one and just part repay it, so are stuck with high APR on small loan.

Also, have you checked what will be total cost of car depreciation over 3 years, if you plan to sell it after that? If you do only 5K miles per annum, maybe it's cheaper to lease something small. There are some cheap deals on Honda Jazz or Skoda Octavia. Depends what you need. It might be cheaper than buying and selling in 3 years.