Car Finance Loan

Fighter1986

Herzlos said:

What's the car?

If it's a high insurance car, then the cheapest way out is probably to sell the car, use the money to clear as much of the finance as possible, and then have bank of mum & dad cover the rest.

Then go buy a cheaper car with cheaper insurance with a normal interest rate. He shouldn't be paying more than about 10-15%.

If the car is as good on insurance as you can get, then the best option is for bank of mum & dad to take out a loan at a normal rate to clear the finance.

In either case, clearing the original finance shouldn't result in paying more than 2 months interest, which means it'll be for well under £8500.

I'm intrigued though; has he already bought the insurance or is the car sat unused somewhere?

Saying that he shouldn't be paying above 10%-15% APR doesn't mean that this option was, or is available to him.

If he has limited credit history, limited income, and limited employment history, he's a high risk and all interest rates across the board will reflect that.

I think someone needs a good sit down and talk about understanding that actions have consequences, which we have to be responsible for, and we need to consider our options before making rash decisions; once we have made the choice, we stick to it and whether the storm.

I'm personally a huge proponent of being patient with advice, but drawing the line at fixing someone else's problem for them. That doesn't teach responsibility, it teaches dependence. 

He has the option of overpaying the loan. I too have a high interest car finance deal, it was the best I could get after some trouble several years ago. I asked the lender about overpayments, and they came back to me saying if I overpaid £400 this month, it would reduce the interest I pay by over £900. Imagine the effect of making overpayments every month?

I'm going to be overpaying my car loan at such a pace that instead of being charged £13,500 interest on a £15,000 car, it'll be closer to £3,000 in interest. Yes, that's where all my surplus income will be going in the short term. That's my choice; a choice your son would be free to make if he wants to save himself a fortune too.