Early Settlement on HP Car loan

JessePinkman26

Hi all,

I took out a HP loan to purchase a car in Nov 2019. As I had woeful credit history at the time, the APR on the loan was staggeringly high. Obviously with hindsight, this was a very stupid thing to do, but I did it, so no point dwelling on it. I've learned from it. My credit file is now in a really good place though in general.

So this HP car loan. I can provide the exact figures if necessary. Never missed a payment on the monthly direct debit, have on occasions paid a little more here and there.

With my credit file now in good standing, I'd figured I'd ask for an early settlement figure from the finance company, which I am still waiting for, however I did only request this on Friday afternoon so not expecting it over the weekend. My intentions are to take a loan from my bank to pay the early settlement figure, and save me money on the stupid high  interest rate in the longer term. I know I'd get a loan, with much lower APR, so I'd save myself money - and obviously I'd actually own the car. Then the longer term plan, is to pay back the bank loan quicker, and once that is done, use my car as a deposit on a new car at much better rates.

As the above is something I've never done before, I just wanted to check that the process I had in mind above is correct? I'd also like to know how companies calculate the early settlement figure? Is there a link where I could do this or could someone work it out for me?

Thanks

[Deleted User]

Settlement will be the outstanding balance plus up to two months interest.

You may not get a loan with a lower rate, if you get one at all, due to your outstanding debt and poor credit history. If not, look to overpay as much as possible - up to double your current payments should be possible, if you believe you can afford a consolidation loan.

JessePinkman26

You mean the outstanding balance of the car, not the full agreement? Then the two months interest.

As I say, my credit is in a good place just now, and I am confident of securing a loan. And yes, if that did fail, then I'd be doubling my payments as a fallback.

Edi81

Your ability to get a loan will take into account that you may not repay your HP. Depending on your income this may not be possible. If you are unsuccessful can you overpay the HP?

MovingForwards

Does it not explain how early settlement is calculated in your HP papers, mine does and on their website.

DrEskimo

This calculator will give you a decent idea:

https://www.financecalcs.co.uk/calculators/settlement

Its unlikely you will be charged additional interest for early settlement. Maybe a nominal optional purchase fee.

I would suggest keeping the car once it's paid off for as long as it runs. I don't quite get your desire to jump straight back into debt on a newer car once it's paid off.

JessePinkman26

Edi81 said:

Your ability to get a loan will take into account that you may not repay your HP. Depending on your income this may not be possible. If you are unsuccessful can you overpay the HP?

Yes, can overpay and it is the fall back plan.

JessePinkman26

So just to update on this.

Have now received my settlement figure, which is a bit less than I was actually expecting. I'd be saving £5000 on future interest!

That's obscene! 

JessePinkman26

Deleted_User said:

Settlement will be the outstanding balance plus up to two months interest.

You may not get a loan with a lower rate, if you get one at all, due to your outstanding debt and poor credit history. If not, look to overpay as much as possible - up to double your current payments should be possible, if you believe you can afford a consolidation loan.

Got the loan at 10%, and I’ve just saved myself £4500 over the piece.

Great result if I do say so myself, and now I actually own the car too.