Hire Purchase Help?!

Beddz

Few weeks ago I took out a Hire Purchase for a car worth £11,000. The APR is 27.4% as my credit was really bad from years before. I didn't really understand what I was getting myself into until now. What is the best course of action to get this paid off ASAP my currently monthly payments are £319. Is it worth saving up a bulk amount £10-11,000 or just pay as much as I possibly can each month sorry if this sounds stupid I'm not the brightest of people when it comes to finance and make decent decisions

Gaz83

You need to check whether or not there is a penalty for overpayments.

If there is no penalty, then overpay as much as you can, as quickly as you can.

DrEskimo

Pay off as much as you can as quickly as you can.

The interest is calculated monthly, so the quicker you can pay the balance down, the cheaper it will be.

Do the terms and conditions mention early repayment fees or optional purchase fees?

Don't be afraid to seek advice before making these decisions. Finance can be complicated and it is much easier to reverse a decision before you've signed the dotted line.

Beddz

Does state in terms and conditions that partial payments can be made but will not reduce the duration of the agreement but long as I notify them of a partial payment they will recalculate the amount of remaining months installments to reflect the way in which the total amount payable has been reduced by early additional payments nothing mentioned regarding fees or anything like that though.

They accept full payments also

[Deleted User]

You don't want the monthly payments to be reduced.

Just overpay and the term will naturally shorten.

Beddz

Is there any safe way to overpay like via bank transfer or do I just ring up and pay
over the phone sorry if this sounds stupid first time having this sort of finance

Just want to make sure when I'm making overpayments the balance is actually going down want it paid off in 6-7 months

[Deleted User]

You can pay any way they allow.

The balance will go down however you pay.

Beddz

Just rang them today regarding making partial overpayments each month and just for example this month if I paid £1000 overpayment I'd save £694 interest? Does that seem normal? Apparently the APR is added onto the agreement at the start so currently the balance is like £19000+ I really don't want to pay more than £2000 interest overall ugh God I need to think before making rushed decisions next time

DrEskimo

Beddz wrote: »

Just rang them today regarding making partial overpayments each month and just for example this month if I paid £1000 overpayment I'd say £694 interest? Does that seem normal? Apparently the APR is added onto the agreement at the start so currently the balance is like £19000+ I really don't want to pay more than £2000 interest overall ugh God I need to think before making rushed decisions next time

£11k over 5yrs (I'm guessing given your £19k+ figure) at 27.4% APR...yea sounds about right.

If you can overpay by £1,000 each month you will probably be looking at around £1k interest, so save yourself £8k. If they won't reduce the term, then just remember to add the saving on your monthly payment on top of your additional contribution to make sure the balance goes down even quicker.

i.e. if you overpay £1k this month, and then your monthly payment drops from £350 to £300 next month, then overpay £1,050 next month, and so on.

ryan121

Beddz wrote: »

Just rang them today regarding making partial overpayments each month and just for example this month if I paid £1000 overpayment I'd say £694 interest? Does that seem normal? Apparently the APR is added onto the agreement at the start so currently the balance is like £19000+ I really don't want to pay more than £2000 interest overall ugh God I need to think before making rushed decisions next time

Yes, that's completely normal and it's also better to overpay as much as you can at the start of the agreement as that will save you the most interest.

Remember also that by making extra payments you can reduce the length of the loan.

The problem is the monthly payment is part of the agreement so normally you can't reduce that or increase it. Your only option is to make extra payments when you can. That was my experience but with a normal loan if you overpay you have a choice of reducing the monthly payment or the term. Maybe it just depends on who supplies the finance.

You could also do a voluntary termination. Once you have paid 50% of the total you borrowed you can give the car back. The amount you have to pay to reach this point should be in your agreement.

DrEskimo

ryan121 wrote: »

You could also do a voluntary termination. Once you have paid 50% of the total you borrowed you can give the car back. The amount you have to pay to reach this point should be in your agreement.

In what way is this relevant to the OP?