Loan advice - borrow more for better rate??

MoneyMachine_2

I'm on the verge of taking a loan I require for various consolidations etc.
Question is do I take a loan for the amount I need, £6000?
OR take a loan for £12000 to get a better rate?

If I take £12000, I will repay the excess £6000 after the first month and then have the £6000 I need at the cheaper rate (saves 2%.) i checked that I can make overpayments up to the full amount of the loan without incurring charges.

Is there anything I'm missing by doing this?? Any flaws to this??
As far as I'm aware this should save me some money on the interest rate but does anyone know of a potential pitfall??

Grateful for any help.

Robert_Sterling_3

Would it be impertinent to ask what is the rate on this loan ... including the APR?  Is it a fixed rate and if so for how long it is fixed  and what exactly does it say in the small print about early repayments? I will not ask who the loan is from but that need not stop you from telling us.

Why all these questions you may well ask  ... Because it sounds too good to be true at first sight and I too wonder if you might be missing something.

If it is true perhaps you could get an even lower rate for borrowing even more.

No doubt wiser posters than I will give you more straight forward answers.

MoneyMachine_2

The rate is 9.9 APR reduced to 7.9 APR if the loan exceeds £12,000. There are no penalties for early payback and no administration fees for setting up the loan.

This is from my bank who I've been with for about 5 years.
I need the loan kind of sharpish and am reluctant to go to other lenders as I've just moved house (for the third time this year) I'm not yet on the electoral role and I have adverse credit from a missed credit card repayment whilst I was away from home.

I've had a few loans from them before and they are always very flexible with regards to extending terms or extending amount or early repayments.

I don't want lots of reccomendations for cheaper loans or credit card cashback at 0% or anything else though as I read the site regularly.

I would presume the loan is fixed.... It's never changed in the past when I've had them but I will find out.

7.9% is as cheap as it gets.

All that in mind anyone know a good reason why I can't take £12000 and then overpay £6000 ???

Robert_Sterling_3

Well I can't if you put it like that.

Rafter

Probably just worth checking the terms and conditions to see how they calculate interest, particularly on overpayments.

Unless it is daily, you will probably find you will pay interest on the whole £12,000 for the first month.

If it is annually, you might find that you pay interest on the full £12,000 for the first year before your overpayment is knocked off. This would be very shoddy and is unusual these days.

One missed credit card payment does not give you a bad credit record though. Get yourself on the electoral role and you should be able to get a better rate loan or 0% card to pay off the other £6000 fairly quickly.

Good luck

R.