Paying loan off to get another?

nukeproof74

Hi all

Bought a car 2 years back and got a loan to pay for it, Im after changing the car and Ive got the cash to clear the existing loan and want to get another loan, anyone have any experience with paying one loan off to get another, should I wait before applying for another, or will it not matter if I apply a few days after paying original loan off.

Any help would be appreciated.

Thanks

[Deleted User]

You'll be viewed as lower risk if you don't demonstrate a continual need for loans.

Ebe_Scrooge

I have to agree with the above - seems like a good way of denting your credit history, thereby leading to less favourable offers.  At the simplest level, it's probably better to buy the new car for cash and just carry on repaying the old loan - assuming that (a) it's a personal loan that's not secured against the car, and (b) the old loan is not at a massively higher APR than what you could get now (which you couldn't know until you applied for a loan and were accepted)

The other option - and probably an infinitely better one from an MSE point of view - is keep the car you've got.  Use your savings to repay the loan, assuming there are no ridiculous penalties for doing so.  Once that's done, rebuild your savings by paying what you would have been paying to the loan, into a savings account every month.  When you've rebuilt your savings pot, use that to buy another car for cash, if you want to.  As a bonus, you'll actually have more in your savings pot by the end of it, as you'll have effectively been paying yourself the interest you would otherwise have paid to the loan provider.