Should I Take Out a New Loan?

EdgeSpice

Hi, Seems silly asking this as it seems to make sense to me but just asking in case there's any downsides that I'm missing. Thanks in advance for any comments!

I purchased a car in Sep 2017 and took out an unsecured loan for £30,000 @ 6.69% for 7 years to pay for it leaving me with a total balance of £37,653.

I've been overpaying on the loan with the strong intentions of having it paid off by Sep/Oct 2019. The balance is currently at £21,891 and I've had the usual adverts for personal loans when I sign in to my online banking. I got a quote on my online bank for an unsecured loan using their "soft search" thing for £20,000 (48 months) and it's come back as initially approved for 4.1% which is obviously better providing it is fully accepted if I went ahead with it.

My understanding is, if I take out this loan, get a settlement figure which I guess will be around £20k plus some after the interest rebate and continue paying this new loan. Ultimately I would save maybe something like £1k in interest I believe? Worst case, I don't get accepted for that loan and it effects my credit score slightly however I have no intentions of taking out any other finance for the time being.

Is there anything I'm missing or any downsides I'm not thinking of?

[Deleted User]

You don't say what the current balance is - actual balance, or reflecting interest to the end of the term. It may be £22k capital, in which case settlement will be £22k plus two months interest.

However, you'll save money on future interest IF you can get a loan at a lower rate. If rejected, it just shows as a search. The credit scores you see are just a gimmick and can be ignored. The search needn't have any significant impact for most lenders.

EdgeSpice

The current balance including interest is £21,891 as above, or that's how I understand it? I took out a loan for £30,000 and the total balance owed as shown on Tesco's site instantly went to £37,653. Every time I've made an overpayment throughout the year, this was taken off of the balance and then within a week an interest rebate was also taken off of that balance. Now leaving me at £21,891.

So my assumption is, if my balance is currently the £21,891 and I get a settlement figure, It'll be less than that cause that balance is if I continued paying monthly with no overpayments I believe?

[Deleted User]

Yes, that should be right, if it displays inclusive of interest.

EdgeSpice

Ok, thank you