Hire Purchase/loan swap - Car finance

Whatif

Hi everyone. I have a 5 year HP deal on a car and am currently 1 year in. I have been watching Martins shows in recent weeks and noted his advice on swapping loans to lower the interest rate and therefore the total paid over the term. I am wondering if this is possible with a hire purchase loan? Is there a way to take a different loan at a lower rate and pay the settlement on the existing loan? Any suggestions welcome if there are ways to make these cheaper. Many thanks. 

DrEskimo

What is the rate on the HP?

You could apply for a personal loan, but the rate you get will depend on how well you meet the lenders criteria.

Having a HP loan already will certainly not help, as the personal loan will be counted on top of the HP loan. They will not assume you are using one to settle the other.

Whatif

Fortunately I am in a very good position both in relation to income as well as credit score (999). HP is currently 6.8% and am getting 95% eligibility on loans at 2.9%. Granted these are representative, however I am not reliant on a positive outcome and should the loan offer not provide savings, I can simply walk away. However, if I am offered anywhere near the market leading rate, I stand to save thousands over the term. 

DrEskimo

Your score won't count for much, but if your credit history is good and your total debt (loan + HP + any other debt) is only a small proportion of your annual income you stand a good chance of getting accepted for a low rate.

Certainly worth applying to a couple of lenders and seeing if you can improve on the rate. Worth checking you HP contract for any early settlement fees though (although they are rare).

Whatif

As an update to this thread. If anyone is considering refinancing a hire purchase agreement with an unsecured loan at a lower rate of interest, my advice is to make a once off application provided you meet the following criteria;

1. Have a good credit score
2. Have a good credit history
3. You haven’t made a succession of hard credit searches in the last 3 months and you aren’t relying on further hard searches for credit in the immediate future.

By using the mse eligibility calculator and a number of soft searches I have secured a loan rate 2% lower than my HP settlement figure, saving in excess of £2,000 over the equivalent remaining term (4 years). I also now benefit from the car being legally my own. 

[Deleted User]

Whatif said:

As an update to this thread. If anyone is considering refinancing a hire purchase agreement with an unsecured loan at a lower rate of interest, my advice is to make a once off application provided you meet the following criteria;

1. Have a good credit score
2. Have a good credit history
3. You haven’t made a succession of hard credit searches in the last 3 months and you aren’t relying on further hard searches for credit in the immediate future.

Number 1 isn't relevant to getting credit, unless you're in the US.

3 is also a grey area.it can be a factor, but affordability is far more important.

2 is good though!

Well done on getting the loan.

macman

Your 999 credit score is a fictitious number that lenders don't even see.

Whatif

Having tracked my credit scores for years on both Experian and Equifax, I would say it’s a fairly good barometer of your financial health. But we will agree to disagree