Refinancing a car loan

sh856531

Hi all

I'm wondering if someone could advise me on the best way to sell my car, pay off most of my loan and then purchase a cheaper car - whilst getting a good deal on an interest rate.

I have a loan for 18K and a car worth about 16K. I could fairly easily sell the car and pay off most of the loan.

My problem is, once done I would need to buy a new cheaper car within the same week. I think my concern is that when I apply for a loan, the credit reference agencies won;t have updated yet so all prospective banks will be under the impression I still have 20K worth of debt and am asking for an additional £8/9K

Is there anyway to avoid this? My current loan interest rate is 2.9% as I have a reasonable income. It's not the end of the world if I have to pay a higher rate, but it seems a bit pointless if its just a pure timing issue with the credit reference agencies taking a month to get updated on my actual outstanding debt amount

Hope that makes sense

Thanks in advance

DrEskimo

Is the loan secured on the car, or is it just a personal loan used to buy a car? How long is left on it?

If it’s just a unsecured personal loan, sell the car for £16k, use £11k to pay the loan down from £18k to £7k, then use the remaining £5k to buy a car.

Now you are left with a £7k loan on a £5k car (although if you buy from a dealer, the car is probably closer to £4K private sale...).

sh856531

Hi Dr Eskimo

Thanks for the reply. I think you've actually got it - I was just over-complicating it in my head

Thanks for putting me straight!

Cheers

Simon

DrEskimo

Pleasure.

Keep the monthly payments the same if you can and you’ll just reduce the term, thereby reducing your interest payable.